{"id":498194,"date":"2026-06-18T00:59:09","date_gmt":"2026-06-18T00:59:09","guid":{"rendered":"https:\/\/www.newsbeep.com\/il\/498194\/"},"modified":"2026-06-18T00:59:09","modified_gmt":"2026-06-18T00:59:09","slug":"the-bleak-view-that-unemployment-needs-to-rise-shows-the-rba-acts-firstly-in-the-interests-of-companies-not-workers-greg-jericho","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/il\/498194\/","title":{"rendered":"The bleak view that unemployment needs to rise shows the RBA acts firstly in the interests of companies, not workers | Greg Jericho"},"content":{"rendered":"

The Reserve Bank governor, Michele Bullock, on Tuesday delivered a miserable assessment of the Australian economy<\/a> by suggesting the best it can do is 2% growth per year \u2013 a rate well below the long-term average and a pace that almost guarantees unemployment will rise.<\/p>\n

On Tuesday morning, there was essentially no expectation of a rate rise. The market had been forecasting rates staying at 4.35% ever since the April inflation figures showed a drop in the annual rate from 4.6% to 4.2%<\/a> followed by unemployment rising to 4.5%<\/a>:<\/p>\n

If the graph does not display click here<\/a><\/p>\n

Not only was there no change in the cash rate, neither was there any change in Bullock\u2019s bleak view that unemployment likely needs to rise more.<\/p>\n

In May, Bullock made it clear<\/a> the RBA was raising rates not to reduce inflation (\u201cthese interest rates rises are not going to do anything for inflation in the next six months\u201d) but purely to raise unemployment so that workers would worry more about holding on to their job than being able to bargain for higher wages.<\/p>\n

If this makes you think the RBA always acts firstly in the interests of companies not workers, you are getting warm. In RBA publications, workers getting higher wages is always a worry; companies making higher profits is never bad \u2013 even if those profits are the main driver of the boost in inflation that caused the RBA to raise rates three times this year.<\/p>\n

If the graph does not display click here<\/a><\/p>\n

In Tuesday\u2019s statement<\/a>, the RBA board suggested it \u201cis focused on its mandate to deliver price stability and full employment\u201d \u2013 but remember, the RBA only regards full employment as the level of unemployment that exists when inflation is consistently below 3%.<\/p>\n

Thus, the RBA has a curious definition of full employment where in order to get there more people need to be out of work than currently.<\/p>\n

The governor of the RBA really has one description of the current economy \u2013 excess demand. It was the motif of her entire press conference \u2013 the repeated justification for raising rates three times this year and also to warn that more rate rises might be needed.<\/p>\n

So desperate is the RBA to suggest that Australia is experiencing excess demand (ie more spending and investment than there is the capacity in the economy to supply) that Bullock suggested \u201cthe economy can only grow by about 2%\u201d and that \u201cmuch stronger growth than that\u2019s going to cause inflation\u201d.<\/p>\n

What a pathetic state of affairs.<\/p>\n

Annual growth of 2% has historically been a sign of a weak economy. Now the head of our central bank says it is as good as we can do.<\/p>\n

If the graph does not display click here<\/a><\/p>\n

The main reason GDP matters at all is its link with unemployment. Historically, GDP has needed to grow by about 2.5% to keep unemployment from rising. Bullock is essentially saying we should be content to have unemployment rise.<\/p>\n

That might be fine if there were strong evidence of too much excess demand causing inflation, but there is not.<\/p>\n

We know that wage growth is showing no signs of soaring \u2013 let alone even an uptick due to increased inflationary expectations.<\/p>\n

If the graph does not display click here<\/a><\/p>\n

In the March quarter this year private-sector wages grew at just 3.2%. If our economy can\u2019t cope with that, we might as well close up shop.<\/p>\n

We also know household spending was pretty weak.<\/p>\n

If it hadn\u2019t been for the big increase in spending on electricity due to the end of the government rebates, household spending in the March quarter would have grown a measly 0.3% rather than the still below average 0.5%.<\/p>\n

Worse still, households barely increased their spending on discretionary items (those things you buy when you are not feeling the pinch). The 0.1% quarterly growth was well down on the 0.6% average.<\/p>\n

If the graph does not display click here<\/a><\/p>\n

Were it not for the abnormal boost in spending in April, May and June last year due to holiday travel and people taking advantage of end of financial year sales, the level of people spending on non-essential items would be historically low.<\/p>\n

So, I guess the excess demand is all in investment?<\/p>\n

And yes, there was a huge boost in investment \u2026 in datacentres.<\/p>\n

Please tell me the RBA is not so silly as to have bought into the snake oil that somehow all that investment \u2013 most of which has the purpose of not requiring workers \u2013 is generating actual demand in the economy?<\/p>\n

If the graph does not display click here<\/a><\/p>\n

At least during the mining boom when construction soared, jobs and wages followed; the datacentre boom is a hollow show:<\/p>\n

If the graph does not display click here<\/a><\/p>\n

The market did not react to Bullock\u2019s warnings that higher rates might be needed. When rates were raised in May, another rate rise seemed a certainty; now it is a less than 50-50 chance:<\/p>\n

If the graph does not display click here<\/a><\/p>\n

Given the RBA\u2019s proclivity for always seeing too much economic activity wherever they look, this may change again, but for now at least the bank looks to have stopped trying to slow an already slowing economy.<\/p>\n

Greg Jericho is a Guardian columnist and chief economist at the Australia Institute<\/p>\n","protected":false},"excerpt":{"rendered":"The Reserve Bank governor, Michele Bullock, on Tuesday delivered a miserable assessment of the Australian economy by suggesting…\n","protected":false},"author":2,"featured_media":498195,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[114,184,85,46],"class_list":["post-498194","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-il","tag-israel"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/498194","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=498194"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/498194\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/498195"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=498194"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=498194"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=498194"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}