Reserve Bank will likely defer needed cut

In retrospect, this measure, developed by Henry Thornton and Roy Morgan, gives a far more accurate reading of the true state of the labour market than the official (ABS) figures.

Its message is reinforced by the sharp drop in advertisements for skilled job vacancies, which fell by 10.8 per cent in March from February, and was 58 per cent lower than a year ago.

Apparently better news comes from a large trade surplus, which will be temporary, and strong housing starts, which is creating Australia's very own sub-prime crisis by encouraging first-home buyers to extend themselves undesirably.

Those insiders who receive, or think they receive, hints about the Reserve's intentions, are suggesting that the decision today is likely to be to sit pat. If so, this would be a foolish mistake.

The Australian economy is already in recession and the time of labour hoarding (to keep good people on the books) is generally over.

The most interesting commentaries about the state of Australia's economy in the recent past come from two former insiders, now outsiders but still well connected. Hugh Morgan and John Stone both have powerful minds and tons of experience, and have spent a fair bit of time sitting around the Reserve Bank's board table.

Morgan, to his credit, issued a mea culpa at a recent meeting of the HR Nicholls Society.

"A very important thing about the GFC, now morphed into the GEC or global economic crisis, in my view, is that none of our key institutions with responsibilities for monitoring the state of the economy, and advising governments and the community at large on what was going wrong, and what had to be done to avert the situation we now find ourselves in, made the right call when it was all beginning to come together.

"I include myself in that category, at least in a modest way. For many years I served on the board of the RBA, and made myself a bit of a pest by asking questions which gave me a reputation for gloom and doom.

"But I never had the courage or the gall to really pursue the issues which were bothering me.

"When we look at the three pillars of the economic establishment in Australia, the RBA, the Commonwealth Treasury, and the Productivity Commission, we find that none of them made a warning call when it was most required, despite the fact that the evidence of gathering disaster was piling up month by month."

Morgan apparently did not notice or discounted the regular warnings shouted in this column.