Economic conundrums

I often argue that most ordinary Australians know more about economics than many Americans who cal themselves economists. Not that the average Aussie really knows it, but they do pick up the essentials, and argue them without really being aware.

All too often Americans are fed markets as economics, so called economists are really finance experts. Given the US relies on ‘market economics’ and has rarely enjoyed an economic regime which includes a social dynamic.

Given that I tend to give Aussie economic commentators a decent level of respect, but just lately there are questions I can’t resolve and no one I’ve approached seems willing to deal with.

Conundrum One: Australia has nearly full employment, which apparently puts the breaks on growth because there are simply not enough workers left in the labour market. I find that odd, but again no one seems wiling to work through the statistical brambles.

Employment figures used to be catagorised, full, casual, part time casual etc. Now they are all simply expressed as employment. Yet many people I know do not work full time, i.e.; 40 hours a week. In fact 40 ours every two weeks is far more common, and often they are on call and rotating shifts, so cannot take on extra work.

Then there are the many who are working two or three jobs, but the statistics don’t factor them. Around 10% of Australians are engaged in full time caring for presumably another 10% of people with a variety of disabilities. Home care is seen as a far cheaper alternative and is probably better in many ways. But many productive people are stripped from the labour market.

Australia has a strong contingent of volunteer workers, often doing jobs which should be filled by wage earners. I know the organisations using volunteers could not operate efficiently without them, but they remain a large pool of around 5 million people sidelined from the labour market.

My point is, Australia claims nearly full employment but is still squandering a large pool of potential labour. Good economics should be recognizing this waste and look at ways to optimize our greatest resource, our people.

Conundrum Two: Interest rates and diminishing returns. Australia and the US are both in stress, but at different points in the economic cycle. The US is trying to drive activity by cutting interest rates and Australia is trying to cool things by increasing rates. Because the pressures are complex, and in some cases external, neither attempt is working.

Worse, the law of diminishing returns seems to be cutting in with the Australian situation. The reality is that consumers are consuming less anyway because of rising costs. Housing costs, including rents, are skyrocketing. Grocery prices are rising rapidly, and recent evidence suggests that standard packaging volumes are shrinking at the same time.

The major inflationary factors appear to be banks and investment houses exposed to external markets and a rush to imports to make up for our reduced production capacity in this country. The latter being a deliberate government policy.

Rather than address that the experts seem intent on holding tight to old domestic paradigms and not really look closely at the fallout from a headlong rush into the global market.

I certainly don’t claim any great wisdom on these issues, it just seems awfully curious no one is looking at the logic gaps.