Employment figures encourage rate cut speculation.

Yesterday's employment statistics showing a seasonally adjusted fall of 38,000 jobs brought the chance of a rate cut back onto the agenda as financial markets savaged both yields and the currency.

With unemployment seemingly stuck at 8.7% the markets are punting that the RBA will make a sixth cut to interest rates in the next three month.

Unfortunately employment does not respond directly to interest rates, and therefore any further rate cut is unlikely to magically resolve the unemployment problem anyway.

Structural change in the economy, along with technology and demands for greater productivity are driving employment figures, and will not be resolved using a single lever such as interest rates.

This week's delay of further tariff cuts in the TC&F sector is not the solution either, but just a temporary band aid in the absence of a constructive incentive policy to create new competitive industries suited to Australia.

Advertisement