If you are thinking about changing jobs, do it now.
The Reserve Bank is going to push up interest rates and keep pushing them up until it pushes Australians out of work.
Wayne Swan, Malcolm Turnbull, and enough economists to fill Sydney Harbour agree our golden days of a 4.1 per cent rate of unemployment are behind us.
Here's the brutal assessment of Australia's most astute Reserve Bank watcher, Rory Robertson of the Macquarie Bank: "The Reserve Bank's concern about medium-term inflation boils down to a particular worry that unemployment has fallen too far and wages growth is accelerating in an unsustainable way.
"Accordingly, the purpose of any further interest rate hike in March will be to dampen domestic demand and push unemployment back towards 5 per cent."
That's the way the Opposition's Malcolm Turnbull sees it. He famously introduced the concept of NAIRU into question time last month. It isn't a Pacific island, it's the non-accelerating inflation rate of unemployment the rate below which inflation is said to climb.
It is also called the "natural rate of unemployment", because if unemployment falls below it, it is said to spark wage claims that will force up inflation and force the bank to jack up interest rates and push unemployment back up.
In Parliament, Turnbull asked Swan at what level he thought the NAIRU was, and if it was higher than 4.1 per cent "how many Australian jobs would have to be sacrificed in order to achieve it".
By the way, a senior Treasury economist confirmed in a speech last year that he thought the answer was "currently around 4.7 per cent, although there is a considerable band of uncertainty".
If the NAIRU is 4.7 per cent then about 66,500 jobs will need to be sacrificed to achieve it and 4.1 per cent will have been as good as our rate of unemployment got.
Swan dodged the question in Parliament, but two days ago on the Sunday program confirmed that the fight against inflation would cost jobs, saying that "the economy may slow a lot but I have no advice from the Treasury that suggests that unemployment will increase substantially".
Note the use of the word "substantially". Swan accepted the premise that unemployment was about to stop falling and begin to climb.
If Turnbull, Swan and the harbour full of economists are right, our dole queues are about to grow again after shrinking more or less continuously for 15 years.
But not everyone agrees.
Dr Barry Hughes is the doyen of Australian labour market specialists. A former professor of economics and an adviser to Paul Keating and several state premiers, he knows his way around the employment stats better than anyone else.
In a study issued this week by the Australian Industry Group, he has dared to challenge the conventional wisdom by asking "how natural is the Australian natural rate?"
He has a number of problems with the idea. One is that Australia appears to have two rates of unemployment at the moment a low one in the mining-rich states "where wage and price inflation has been increasing and is almost completely outside the control of the authorities", and a higher one in the rest of the country where "the natural rate of unemployment seems to have gone missing in action".
NAIRU turns out to be elusive. Like the Loch Ness Monster, whenever it is sighted, it moves.
Back at the start of the decade NAIRU was believed to be 6 per cent.
If unemployment fell lower than that, it was thought that inflation would rise. Unemployment did fall lower, inflation didn't rise and so the estimate of NAIRU was cut. It's a continually moving constant.
Hughes has dared to suggest that the conventional view about NAIRU "might be incomplete, if not wrong".
Professor Ian McDonald, of the University of Melbourne, has calculated an alternative lower-bound to sustainable unemployment, using a different method popular in Europe. It abandons the traditional assumption that a low rate of unemployment will automatically spark inflation by pointing out that it depends on a number of things including trade union power. Australia's trade unions are weaker than they used to be, partly as a result of WorkChoices. As a result it might now be possible for unemployment to fall very low without sparking wage-price inflation.
His estimate of the lowest sustainable rate of unemployment in Australia right now is 2.5 per cent a rate that seems low only to Australians with short memories. It is where the rate was in the late 1960s and early 1970s.
McDonald says only at that level should wages now pose a threat to inflation.
Only at an unemployment rate of 2.5 per cent would it be literally true to say that Australians were fully employed.
But surely the Reserve Bank needs to push up interest rates when its board meets today in order to contain the inflation we've got right now, I asked him on the phone last night.
It didn't, because interest rate rises were designed to tackle wage inflation, which we didn't have in most of the country, he replied.
The inflation we do have right now is fuelled by climate change (higher energy and water prices), a worldwide food shortage (higher grocery prices), higher oil prices, higher rents and the mining boom.
Higher interest rates will dent none of these.
But they will crunch the economy and push people out of work.
For no reason, in McDonald's view.
We will have abandoned the quest for a 2.5 per cent national rate of unemployment just when it was within our reach.
As it happens the ACT's unemployment rate has already fallen to 2.5 per cent. Inflation here is no worse than it is in Melbourne where the unemployment rate is 4.5per cent.
McDonald might be right. If he is, our Reserve Bank is about to make a tragic mistake.
Peter Martin is economics editor
peter.martin@canberratim es.com.au
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