Labour pains looming in the economic fog

A further 7.5 % of the workforce were underemployed - working part-time but looking for more work - 934,000 Australians. In January, a decade-long record 17.8 % of the workforce, or 2.21 million Australians, were unemployed or underemployed. (Here is a link to an article that explains these broader numbers, and here is a link to the latest release.)

These numbers deserve to be taken seriously by Australia's economists and policy-makers. They help to explain why there has not yet been a general wage surge despite the supposed strength of the 'miracle economy'. They also perhaps help explain why the government's popularity is so low. Large numbers of people unemployed or underemployed just cannot take seriously the government's rhetoric about the strength of the economy.

One of Henry's more reliable sources of opinion comes from the real world of opportunity shops, people working part-time in poorly paid jobs battling to find a half-decent house to rent and to pay the rent when they do. This person said recently: 'There are a lot of people hurting out there'. This is the real situation.

The question, of course, is whether or not further interest rate cuts can fix Australia's dysfunctional labor market. To ask this question is to answer it. Fixing Australia's labor market is not a job for Glenn Stevens and the Reserve Bank.

The global situation and the current state of Australia's economy are both hard to read, but improvement seems more likely than catastrophic meltdown. Another rate cut now would do little harm as Australia's goods and services inflation is undoubtedly low, and may help to further boost confidence.

If Wayne Swan's hands were on the levers of monetary policy, cash rates would already be lower, and further cuts would undoubtedly be coming. But wiser heads in Australia's independent central bank may prevail. The lid must be kept on an economy facing a massive investment boom and pressures on wages from politicians, senior officials and more deserving cases including carers, nurses, police and members of the armed forces. Plus of course, people employed in the mining and related services, where skilled workers are scarce.