I am reluctant to bag and slag the employment data, because it is all we have when looking at the health of the labour market. But there are a few quirky bits and bobs in the news of the wonderful run of job creation over the past year.
Employment rose by a remarkably strong 3.1 per cent in the year to September, a fabulous result.
But, and it is a big but, the results are at odds with just about every other indicator in the economy. EIther they are misleading or the employment data are misleading.
One way to check it to have a look at the economy the last time annual growth in employment was above 3 per cent. This takes us to the period around 2007 and into early 2008.
In 2007, annual real GDP growth was generally around 4 to 5 per cent, as you would expect with such jobs growth. The economy was on fire! In 2008, the CPI surged by over 4 per cent which is again as you would expect given the boom in employment. The RBA was hiking rates at an agressive pace, with the official cash rate hitting a stonking 7.25 per cent in 2008. Wow!
Australia’s banking sector is in peak health and the household sector is having few if any problems managing its debt.
This is the good news from the Reserve Bank of Australia Financial Stability Report which effectively put the kybosh on the fear-mongers who continue to forecast a crisis in household debt, a crash in house prices and turmoil in the financial system and more specifically, the banks.
The key conclusion from the RBA was that “the financial system is in a strong position and its resilience to adverse shocks has increased over recent years.”
These are strong and direct words from the normally cautious RBA.
It also noted that the bank’s non-performing loans (bad debts in other words) “remain low” and bank profitability “is high”, which are the key indicators of financial stability and strength. The RBA went as far to say that “the banks also have ample access to a range of funding sources at a lower cost than a decade ago” which is fundamental to the functioning of the financial system. Nothing was presented that indicated current problems in the financial sector.
The RBA assessment can be tested from the markets, specifically bank share prices. Most evidently, bank share prices remain strong as the investment community continues to place its money where its mouth is when determining actual performance and even risks when allocating investment funds.