From David Bassanese today, who is one of our best economics correspondents, building on Colebatch and Martin's good work (also promoted heavily here before anywhere else, but after Colber and Marty!):
Could it be that Australia’s amazingly weak employment performance last year was largely a statistical mirage? There’s been some tantalising evidence to that effect over the past week.
The potential implications, however, are profound in that new evidence suggests the economy was far healthier than commonly assumed. If so, that would help explain some anomalies such as the surprising strength in employment over 2010, and the surprising weakness in jobs growth last year relative to job advertisements.
To my mind, had the Reserve Bank of Australia had this new evidence, it might have thought twice about slashing official interest rates by 50 basis points last month. It might not have cut them at all.
What’s more, this new, more positive spin on the labour market, together with firmer employment and retail sales reports in recent months, undercuts the case for a further interest rate cut as early as next month. The federal government’s budget announcement of a cash splash for households and local government by end June also counts against further RBA action anytime soon.
I’d add that history suggests, in any case, that the RBA has been loath to change interest rates in the month following a federal budget over the past 22 years.
