HONG KONG (Reuters Breakingviews) - Australia’s labour market shows an economy in need of work. More people had jobs Down Under in August, mostly because of part-time positions. Overall unemployment ticked higher. It augurs additional monetary policy easing. Loosening government purse strings would be a better option.
After nearly three decades of unbroken growth, the $1.2 trillion economy is cooling. That prompted the Reserve Bank of Australia to slash interest rates for the first time in three years: it cut in June and July, to a record low of 1%.
The full effect of those shrinking borrowing costs, plus looser lending rules and tax breaks, is still trickling down. Thursday’s snapshot, however, is not reassuring for a central bank that estimates unemployment needs to fall to 4.5% before wages begin to increase, and to rev up inflation that has consistently undershot official targets. Instead, the jobless rate increased, to 5.3%.
A growing population and rising workforce participation have helped take unemployment to a 12-month high. What’s more, mostly poorer quality jobs are being created. Indeed, full-time employment shrank in August, while 50,200 part-time roles were added. The underemployment rate, which tracks people who would like to be working more hours, also rose. It all adds up to plenty of slack in the economy, and local business surveys do not suggest a fast turnaround is coming.
There are signs that the lower rates and a modest fiscal boost are helping. The Australian housing market is showing small signs of life, with price increases in some cities last month, though that is unlikely to generate the sort of benefits seen in the past. Credit growth, for one, is restrained, and UBS analysts point to low sales listings too.
But it’s a reminder that lopsided stimulus, led by monetary policy, risks simply pushing up asset prices.
The government, which campaigned in recent elections as a good steward of the country’s finances, is overly restraining itself. After balancing the budget for the first time in a decade, a A$7.1 billion($4.8 billion) surplus is expected for the current fiscal year. The weak jobs data clear the path for Canberra to share a little more of the burden with the RBA.
Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.
Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.