There was an article in the FinReview today (sorry, unable to provide a link from this device) which suggested that stagnant wage growth, and by implication inflation, could partially be blamed on the high amount of university graduations nowadays. The reasoning was that there are too many overqualified people in the job market nowadays which drives the cost of labour down; employers have the luxury of picking only the most qualified applicants and the rest, even with honours degrees, are forced to serve fries. Too often, the article stated, too much focus is placed on labour demand and not supply. At the moment the labour market is oversupplied, and people are underemployed.
It used to be assumed that an unemployment rate falling to the low to mid 5's would be the tipping point regarding labour demand/wage growth. Now, that figure could be as low as 4%.
It's going to be a long ride.
Well I have read lots of contradictory stuff but I think its certainly true that a degree simply isn't worth what it was ten or twenty years ago because everyone has one - even MA's are getting too common depending on the field. It was the worst thing Gillard could have done to un-cap the number of degree places - all it did was make degrees incredibly common. My friend the civil engineer said they were looking for someone to do CAD drafting in their office - something you don't even need to be engineer-qualified to do - and that he got inundated with applications from Australia and overseas with MA qualified people who were looking to try and get a foot in the door. He said in the end they didn't even look at people who had less than straight distinctions on their transcripts and that many people they interviewed had been unable to get even the most basic engineering related jobs since graduation; the market is well and truly saturated there.
Also raises the moral issue of: What are we doing training all these people and loading them up with HECS debts only for them to not find work in their field of training; the Productivity Commission recently estimated that up to a third of HECS debts will never, ever be paid back because the participants don't ever get any sort of work that will take them over the HECS threshold. To me it is completely immoral of the universities to take a young person's (government subsidised) fees and not actually give them anything useful in exchange - we don't need degree-qualified people wiping bums or making lattes if that's what the growth industries are. And its a complete furphy that STEM (Science, Technology, Engineering & Mathematics) degrees are the ones we need as a nation - these degrees actually have some of the poorest vocational outcomes of them all, especially since we aren't really a manufacturing nation any longer.
Interest rates? As Don has just posted, nobody has clue what to do, so I expect the RBA will take the coward's way out and do nothing.
I think part of the problem is that the current situation doesn't fit any standard textbook definition of what should
be happening - low interest rates and relatively low unemployment should be creating demand for labour and credit but it isn't doing either of these things. So the RBA has no idea of what to do other than to keep trying to avoid a housing/banking crash at the expense of everything else, which I think has been the unofficial mantra since Howard. In order to do that they'll probably consider cutting rates even more - possibly below 1% next year?