Australia’s Fantastic Economic Fundamentals – A New Benchmark

 

A new benchmark in Australia’s economic history was reached in the last few weeks with the inflation and unemployment data.

Just to recap – the annual rate of underlying inflation fell to 2.1% in the March quarter 2012, while the April 2012 labour force data showed the unemployment rate falling to 4.9%.

It is not since the early 1970s that Australia has recorded an unemployment rate below 5.0% whilst simultaneously registering underlying inflation at 2.1%.  The only other times in the last 40 years that Australia has had the unemployment rate below 5%, underlying inflation has been at 2.7% or higher – sometimes considerably higher.

Achieving low unemployment with low inflation is rare.  It is also great news.  Low unemployment means jobs for those who want them, household income growth, additional production and all of the individual and social benefits that come when the economy is running close to full employment.

Low inflation means a strong likelihood of rising real wages for all of those people with jobs, additional purchasing power for other income earners and a boost to the overall productivity of the economy.

Australians live in fantastic economic times.  Long may it last.