The unemployment rate in Australia now sits at 3.5%, while in the United Kingdom it is at 3.8% and in the United States, 3.5%. Wages, though, are falling in real terms in all three countries, where they are down more than 3%.
Australia and the US seem to be in a healthier spot, even after factoring in inflation — 6.4% in Australia and 8.5% in the US in July (down from 9.1% in June).
The game changer, though, is inflation in the UK, now at 10.1% in July — the highest since 1982 and the first time since then that it has reached double digits, according to Britain’s Office for National Statistics. Economists had forecast a rise of 9.8%, so something of a miss. And according to the Bank of England, inflation will reach 13.3% in October. Australian inflation is forecast to reach 7.7%-7.8% by the end of the year, while it has been estimated June’s 9.1% was the high for the US.
While core inflation — which excludes energy, food, alcohol and tobacco — in the UK came in at 6.2% in the year to July 2022, rising from 5.8% in June and ahead of forecasts of 5.9%, the measure is unhelpful at a time when necessities are so expensive. It considerably understates the damage that rising food and energy costs are doing to household incomes. Britain’s cost pressures set it apart, especially in July when food prices surged 2.3% as the price of milk, cheese, cereals, bread and eggs all rose sharply. The core measure ignored that highly damaging surge for millions of Britons and tells us nothing about what is really happening in a developed economy with the growing characteristics of a third-world disaster zone.
According to the Bank of England’s latest economic forecasts, inflation is still a couple of months away from its expected peak, which isn’t expected until autumn, when the cap on household energy bills is reset. At that point, economists warn, the economy could enter a long recession as high energy prices lead to a drop-off in consumer activity and hit businesses and force them to sack thousands of workers, driving up unemployment in a matter of months.
That cap could rise by 300% or more. The latest forecasts suggest the energy price cap could leap to £4266 ($A7420) annually early next year from its current £1971 ($A3390). The cap is expected to reach more than £US3000 ($A5220) in October, following the next review.
UK media reports and surveys suggest households are already choosing between heating and eating. It’s the 1970s all over again, with the latest incarnation of Margaret Thatcher in Liz Truss poised to become prime minister with no understanding of what is happening in the country she wants to lead.
