The Reserve Bank hammered an ambitious stake in the ground when it indicated that it was after an unemployment rate of 4.5 per cent.
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At that rate, it argued, employment could reasonably be considered full.
Excess capacity in the labour market would be soaked up, wages would start to rise meaningfully and that would all combine to drive inflation back up into the RBA’s target band.
It is quite a challenge. The last time unemployment was that low was late 2008, while inflation has spasmodically nudged into the 2-to-3 per cent inflation band only a couple of times in the past five years.
The fire under the economy is barely flickering. GDP growth at less than 2 per cent is the most insipid since the global financial crisis dragged everything down.
The RBA made the first of two successive rate cuts within days of its 4.5 per cent clarion call, taking the official cash rate down to a new low of 1 per cent.
It is way too early to expect any traction from the cuts, but the June jobs figures out on Thursday will be an interesting reference point.
External Link: RBA unemployment target Forward job indicators are still falling
ABS data points to more than 360,000 jobs being created in the past six months.
That’s a solid effort, although roughly over the same journey the unemployment rate has risen from below 5 per cent to 5.2