Under-utilisation rate back in 2009/10 range

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In the comments, there are often comments to the effect that the labour under-utilisation rate is a better indicator of labour market slack than the unemployment rate. Given this, I thought this chart a useful addition to the broader jobs post.


The labour under-utilisation rate rose 30bps in 12.9% in the 3m to May’13 (and 20bps to 12.8% in trend terms). With labour market slack increasing, it seems likely to me that core inflation pressures will remain weak — which means the RBA has ample scope to ease.


  1. Now….. if I was the RBA, I would wait for the next CPI number and then, if as expected it’s benign, I’d go for 50 bps or even 75 bps. RBA has got to be bold now or they’ll be constantly be behind the curve. It almost feels like they completely wasted 200 bps of cuts here. Little step, after little step they are running to slow. They need a big jump. Considering the share markets is falling again, where is inflation coming from????

    1. Because sometimes we make it too hard… but it’s simple really. Just watch asset prices… if they go up 10%-20% p.a. then you are going to have an inflation problem, otherwise you are not. Simple. With the share market back at 2005 levels, and house prices well contained (with very low transaction volumes which is what is supporting prices), people are not going to splash out!

      1. I think this is one of the few times we are in complete agreement, ssec! An extra 50 bp last year could have made all the difference. My main concern is that by following this passive path, we will approach the zero bound. I just hope the RBA has some people thinking about how to implement QE if the time comes.

        1. They did it already in 2009 – repo of ‘internally securitised RMBS’ meant the basically held mountains of IOUs that had not been mkt-tested via launch in the private sector. I guess they would do this again (buy lots of bank IOUs via the discount window). Of course with a bigger shock the would need something more permanent.

  2. Unrelated comment but couldn’t resist! Can someone tell the Japanese central bank that monetary policy is not a game, and that you do not play with people money? Honestly I think they have been completely irresponsible and their policy is causing major instability. All for what? 0.5 p.a. inflation? big deal! As soon as they can Japanese will start saving again. Monetary policy can’t win vs demographics.

      1. It can’t be too good for confidence …. can you imagine such roller-coaster in Australia? And I thought they were buying ETFs too… hopefully not at the top :) What a mess.

        1. I think global central banks have succeeded in tightening global financial conditions these past few weeks. btw i made the usual post on the MoF’s weekly japanese flows data.

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