The RBA rediscovers employment

Ian Rogers Finance regulation

Chiselled in stone in the RBA foyer and so long neglected, “The maintenance of full employment,” is back where it will remain.

Anthony Albanese, the Australian Labor leader, will see that it does, as it is central to his election and many re-elections.

Instability flowing from labour market neoliberal reforms and the deregulation of the financial system 40 years ago twists around the destabilising explosion of population and demand around Australia’s Asia. Let’s say this is driving society firmly for reform.

At Phillip Lowe’s RBA, he and his board are for once working in the manner of technocratic custodians doing Nugget Coombs’ work - and we have a 25 bps rate cut, to 1.25 per cent. Shane Oliver from AMP expects plenty more cuts, as does Banking Day.??Any QE options ahead, it’s extremist to think Australia’s dilemmas will tip as far as that. QE won’t be needed, always available.

For now, a nation rattled by the Morrison government’s re-election is pleased to party along with yesterday’s late-arriving easing in monetary policy. Look at the coverage and the clichés. Ra ra ra ra, let’s ramp up house prices, loosen lending and bonuses will be back for Christmas.

To explain things, Phillip Lowe last night delivered the most important speech by an RBA governor so far this century.

Ever since the 1970s the Australian people have been abandoned by elites.

Periods of sky high unemployment, a persistent abundance of underemployment and frustrating data on hours worked – this all converts into a horrifying cost. All those days and years people did not work was work and output and production and income and profit and social cohesion lost to society.

45 years of excessive and destructive levels of underemployment in Australia and a weak business culture help explain the defeat of Bill Shorten’s Labor, high rates of suicide and now Lowe’s first rate cut.

Last night Lowe played no Vernian trick, no snappy sci-fi flick, instead wrenching the wheel in the right direction.

And Banking Day found what we were looking for and had feared we would never get to see.

Phillip Lowe aired the notion that unemployment levels can be lowered and that inflation nuttery (in its oh so many forms) can be deterred. Millennials and mass immigration, reliable social services, steady welfare spending and a work ethic make for an incredible outcome for our culture, one the last generation’s reformers were looking for.

Hard to reach pools of able labour are walking off the ranch and into retail, even fintechs.

It’s Kalecki and Keynes all over. The whole point of all those other crises and blow-ups and stress was to deliver the best of what is going on in the Australian economy right now.

The project for Albo’s Labor and in the meantime Lowe’s RBA is to redefine voluntary unemployment, to one point something, followed with a full Omaha assault on the involuntary component.

Phillip Lowe in his own words is the next article.