Gareth Hutchins

They're trying to reduce the number of people in the NDIS from 760,000 to 600,000 by the end of the decade.

It's a major one.

But if you're going to be increasing defence spending to 3% and everything else, we've got AUKUS humming away in the background, how are they going to manage it?

And see how popular the Stage 3 tax cuts were.

I mean, that was a broken promise.

People loved it.

It upset a lot of people, but the government didn't suffer at the ballot books because of it.

And so this housing situation could be similar to that.

So it found that it studied the RBA's rapid interest rate hikes that it engaged in 2022, 2023, and they increased the cash rate target by 4.25 percentage points

over 13 consecutive hikes.

It was very rapid.

And one thing to remember about how inflation targeting and interest rates and central banking works in the modern world is that they're focused on the demand side of the economy.

So if they want demand to slow down, they'll lift interest rates.

And that will impact labour supply indirectly, according to the central bank, because what it does is it lifts firms' borrowing costs and then that will make the firms reduce their investment, reduce their output and reduce their demand for labour.

As they said in their statement of monetary policy, a quarterly statement in 2024, monetary policy has little direct effect on labour supply or structural features of the job market.

This working paper from the IMF had a look at what the RBA did in 22-23 and it found that when it lifted interest rates rapidly, that induced an increase in labour supply.

which is not what is supposed to happen according to the workhorse models that central banks use.

And the reason it did that is because highly indebted households were thinking, how am I going to pay for these higher interest rates?

So they took on second or third jobs, they took on more hours, or the partner in their house who wasn't working entered the labor force.

And it was so significant that it has challenged the central bank orthodoxy.