Even if values did end up falling by 20 per cent in both cities, they would still be about 32 per cent higher in Sydney and 25 per cent in Melbourne than where they were five years ago. Still, it's true house price falls can produce a negative "wealth effect", particularly for recently mortgaged households, which may trim their spending as they face the prospect of "negative equity". Loading And yet, lenders have been tightening borrowing criteria for most of this year, under the shadow of the royal commission. And most borrowers have the option to simply stay put for longer. But still, the Reserve Bank has to be mindful that the pace of future interest rate rises does not put undue stress on such households, causing large numbers to default.

For households who took out their mortgages some years ago, the bulk should still feel comfortable they remain ahead on the deal, so the wealth effect is less. For buyers entering the market as prices fall, the fall in prices may actually boost their spending capacity, if they take on less debt than anticipated to buy a similar property. So, there seems little reason to get too worried about the wealth effect, if prices unwind as predicted. Loading Replay Replay video Play video Play video On the activity side, home price declines may lead to a slowdown in the recent breakneck pace of new home building. But population growth remains robust, supporting new demand for homes.

And amid reports of significant backlogs of work to be done, some cooling in demand for new projects may simply provide some space for existing developments to be completed, with little impact on overall activity. So, falling house prices are something to watch, but unlikely to prompt a knee-jerk reaction from the central bank. Loading Of substantially more interest to the RBA is news this week that Australia's jobless rate has suddenly fallen to 5 per cent – economists' best estimate of the rate where the demand for labour is roughly equal to the supply of it. Once we get below this hallowed "NAIRU" - the non-accelerating inflation rate of unemployment - wages should start to pick up as employers have to compete to attract qualified staff.

So, in the words of every child sitting in the back seat: Are we there yet? The honest answer is we don't really know. Turns out, economists have been revising down their best estimates of the NAIRU for the past decade - not just here, but in other major advanced economies too. In fact, the US jobless rate had to fall quite some way below their best estimate of NAIRU before they saw signs of wages growth - which is now happening. In Australia, back in the 1990s, economists though the NAIRU was 6 per cent. Estimates fell to 5.5 per cent in the mid 2000s. Now the mid-point estimate is 5 per cent - with a wide band of error. It would not be surprising if it turned out that our real NAIRU is somewhere south of 5 per cent. It would not be surprising if it turned out that our real NAIRU is somewhere south of 5 per cent.

We'll only know for sure once we start to see evidence of wages turning up. But even if we're not yet at the NAIRU, clearly we are much closer to it than we were - and we've arrived there much quicker than the RBA had been expecting. Of course, monthly numbers can jump around. Credit:Glen Le Lievre Of course, monthly numbers can jump around. This month's large fall in the jobless rate was associated with a large fall in the number of people searching for work - and it would not be surprising to see some rebound next month to 5.1 or 5.2 per cent. In such times, it's important to look at the "trend", which smooths out monthly fluctuations in the seasonally adjusted numbers. Here, we also see strength. The trend jobless rate has fallen noticeably over the past four months, from 5.47 per cent in April to 5.17 per cent.

So, while it's important not to get too excited over one number, Australia's jobless rate has unambiguously fallen over the past few months. Australians seem stubbornly immune to hearing about good news. But in reality our economy has well and truly picked itself off the mat, after being thumped by the end of the mining boom. The economy is now growing a solid clip of 3.4 per cent, with growth broadly based, fuelled by strong business investment, home construction and larger-scale infrastructure projects. RBA deputy governor Guy Debelle says increasingly, new jobs are not being advertised through traditional avenues and increasingly come about through informal links and networks like LinkedIn. Credit:Andrew Meares Job vacancy rates are at their highest since measures began over a decade ago, and firms are reporting difficulty finding available workers in some industries.