Unemployment rises as RBA rate hikes expose a costly misread of the economy

In February the unemployment rate rose from 4.1% to 4.3%, providing further evidence the Reserve Bank misread the economy when it raised rates in both February and this week.

What a pity the RBA was in such a rush to hurt Australians.

When the RBA raised rates last month and also this week it was looking back at old data that suggested the labour force and Australia’s economy was doing better that it really was.

The Bureau of Statistics revealed today that the unemployment rate in February the unemployment rose from 4.1% to 4.3%. This makes a lie of the RBA’s suggestion inflation was increasing due to “higher capacity pressures”.

Rather than, as the RBA said on Tuesday, that “the unemployment rate has been a little lower than expected” it is now at the 4.3% level it estimated it would rise to by June this year.

Rather than suggest employers are having to struggle to find workers, the figures indicate the numbers were mostly bolstered by a bit of a jump in work for youth. Employment for those aged 25-54 fell:

The worst news, however, is that these figures come from a time before the impact of both rate rises have impacted households and before petrol prices rose around 40 cents a litre due to the Iran War.

Unemployment was rising before the RBA decided to raise interest rates by 50 basis points – or an extra $194 a month in repayments on a $600,000 loan and before the price of filling up a 50 litre tank of petrol rose around $22.50.

Earlier this month the Governor of the RBA, Michele Bullock told business leaders she wanted the unemployment rate to rise. Well, she has got her wish, and because of the two rates rises, risks getting more than she bargained for.

The Reserve Bank was desperate to raise rates to look tough on inflation – all it has done is make life much tougher for Australians.