The Reserve Bank of Australia (RBA) released the minutes from its May meeting this morning, with no major changes to its positions on economic growth or financial stability.
The highlight from the May minutes is that the bank placed extra focus on the the composition of the labour market, with a more detailed discussion centred around the rise of part-time work in Australia.
Here’s the key excerpt:
Members had an in-depth discussion about changes in the composition of employment in recent decades. They discussed the implications of the secular upward trend in the share of part-time employment for labour market spare capacity. The share of part-time employment in Australia, which had increased from around 10 per cent in the early 1970s to over one-third at present, was relatively high by international standards, especially for younger workers; one driver is that students in Australia are more likely to combine their studies with part-time jobs. Data from the Household, Income and Labour Dynamics in Australia Survey suggested that the majority of part-time workers worked part-time as a matter of choice given their personal circumstances, which vary across their lifecycle. People aged between 15 and 24 years are more likely to work part-time at the same time as studying, while a significant share of women between the ages of 25 and 44 years cite child-caring responsibilities as their main reason for working part-time. Furthermore, some older workers indicate a preference for working part-time, possibly as part of their transition to retirement. The survey also indicated that some part-time workers cite a lack of full-time opportunities or that their work requires part-time hours as the main reason for working part-time.
The bank went on to suggest a more nuanced analysis was required given the prevalence of part-time work in the modern Australian economy.
Members observed that growth in part-time employment had become more cyclical over time because businesses had been more able to respond to changes in demand by adjusting the hours worked by employees rather than the number of employees. This increase in labour market flexibility had been enabled by a range of factors including labour market deregulation, technological change and the shift towards a more service-based economy. As a result, the distinction between full-time and part-time work had become less important in assessing labour market conditions. In addition, understanding the degree of spare capacity in the economy required an assessment of the additional hours part-time workers were willing and able to contribute as well as the number of unemployed people.
In other words, too much focus on full-time versus part-time work when assessing the health of the labour market runs the danger of over-simplification.
The bank is highlighting that people are doing different types jobs at different times in their lives. Older people – and there are an increasing number of them – say they want to do more part-time work towards the end of their careers.
Over time, too, businesses have become more able to vary people’s hours rather than take them on or off the payroll.
All of it adds up to the RBA trying to guide analysts, business people and economists to look at overall job creation, rather than worrying about the larger contribution of part-time positions versus full-time.
Elsewhere, the minutes show that the bank is sticking to its forecast for economic growth to reach 3% by the first half of 2018.
While measures of business confidence have remained strong since the RBA’s announcement in early May, there was notably a material decline in retail sales and consumer confidence took a dive this morning.
It noted that headline inflation had crept within its 2-3% target in March, but it still expects wages growth to remain sluggish as the economy continues to transition from the mining boom.
There were no changes to comments on housing stability, as the market waits to assess the affect of the latest round of macro-prudential measures.