RBA trades Mr Rainbow for….Mr Rainbow 2.0

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Via The Australian:

A recent uptick in unemployment isn’t a sign of emerging weakness in the economy, according to a policy setter at the Reserve Bank of Australia, in comments likely to strengthen the view that the bank’s next move will be to eventually raise rates.

“These latest figures [for March] are an encouraging sign that maybe the weakness in the labour market is beginning to turn,” Mr. Harper said in an interview with The Wall Street Journal.

Mr. Harper said the increased focus on employment was linked directly to concerns that softness in the job market could stymie already record low wages growth, and hold back rises in inflation.

“While the labour market is weak, wages growth will be low, and while wages growth is low you can’t expect to see much of a pick-up in inflation,” he said, adding that he had no doubt the job market had excess capacity.

…“What we will be hoping for is an increase in hours worked, and increase in fulltime employment, and unemployment to remain steady and start to fall,” he said.

Of course, rising unemployment is always bullish in Australia. Perhaps Mr Harper could take a moment to consider that:

  • the terms of trade crash has resumed;
  • mining capex is still falling and dwelling investment will join it shortly;
  • the car industry is shuttering;
  • house prices are set to roll once macroprudential tightening hits the tipping point and that will stall services investment.
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Yes, we’re enjoying a little better activity today as last year’s commodity boomlet joins this year’s dwelling boom but look beyond your nose and it’s all headwinds.

We had to put up with uber-optimist John Edwards talking up the dollar for years. Perhaps it would be wiser to be talking down the currency in the global press, no?

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.