RBA Sets Eye on Full Employment
Last updated on August 26th, 2022
The Reserve Bank of Australia (RBA) has updated its economic forecasts. Amidst high uncertainties, there is enough reason to be positive and welcome what may become of the economy in the near and far future. They have set their eyes on full employment.
The RBA predicts that the unemployment rate will increase by 4 per cent by 2024, increasing from 2022’s by 3.25 per cent. According to this scenario, Australia would likely start the next economic upturn with an unemployment rate equivalent to or lower than the RBA’s current estimate of full employment. As a result, the economy will undergo a true transformation.
What is Full Employment?
According to Luci Ellis, assistant governor of the RBA, full employment in percentage terms is somewhere between the "low 4s and high 3s." Some may disagree with the idea that the job market will still be strong despite domestic and international uncertainties. While it is true that until 2024, there are still many economic hurdles to cross, it is good to think about what the economy will be like.
Over the years, Australians have endured meagre wage rises. However, the current spike in inflation is not helping. In fact, it has resulted in a sharp decline in wages. The situation raises the issue of potential salary growth rates.
In the scenario depicted by the RBA's estimates, wages are expected to expand at considerably better rates, supporting consumer spending, lowering debt, and boosting investment. In many ways, the economic profile would be greater than it is now, which will benefit both workers and businesses.
It is good to note that the current economy came out from a pandemic which shut it down for a while. However, throughout the two-year pandemic period, Australia’s unemployment rate declined to lower than 5 per cent to its all-time low in 50 years. These are considered good, even miraculous outcomes.
A future where the unemployment rate stays at historical lows and wages are finally expanding strongly would provide some vindication for RBA governor Philip Lowe, who has quite consciously pushed the Australian economy forward to discover where full employment may sit. In the early months of 2022, Mr Lowe continued to advocate for attaining full employment and pay growth.
According to Mr Lowe in February, Australia was within reach of a historical milestone – achieving an unprecedented unemployment rate that is below 4 per cent. This is crucial because for many Australians and their communities, low unemployment has substantial economic and social advantages.
One of the RBA's legally mandated goals is full employment, and the board is determined to do its part to help it be accomplished. By the end of this year, the unemployment rate is expected to have decreased further to 3.25 per cent, according to the RBA.
Creating more jobs for Australians is a noble cause, and the aim to push toward this objective was laid out excellently by the RBA.
Economists predict that sooner rather than later, the unemployment rate will fall below 3%. Although not everyone may agree yet, they are figures that no one in the present Australian workforce has ever seen before.
It is a good year for Australians who are in search of work. The current labour market is at a unique point in history where employees can look for better-paying positions. College graduates can obtain employment. Those who are unexpectedly laid off can swiftly get new jobs.
The economy is undoubtedly hampered by rising interest rates and inflation. However, the fact that every worker in Australia who wants to land a job can get one will make the future a whole lot easier for everyone.
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