, we have constructed a measure of underutilisation that takes account of the part - time workers who want to work more hours. this measure adds the extra hours sought by these workers to the hours sought by those who are unemployed ( graph 3 ). [ 2 ] these extra hours are equivalent to around 3. 3 per cent of the labour force, which, taking account of conventional unemployment, means that the underutilisation rate is 8. 1 per cent. this hours - based measure is preferable to heads - based measures of underutilisation that treats an unemployed person in the same way as a part - time worker seeking a few more hours. graph 3 unlike the unemployment rate, which has trended down over the past 20 years, the underemployment rate has been relatively stable. these different patterns in unemployment and underemployment suggest that fewer inroads have been made into spare capacity in the labour market than suggested by looking at the unemployment rate alone. this is something we take into account in thinking about monetary policy. there is, though, one other perspective on the measure of underemployment that i would like to share with you. in the past, when part - time work was not as readily available, many people – mostly women – faced the choice of taking full - time paid employment or no paid employment at all. many chose to, or had to stay outside the labour force because working was not a realistic option. from the perspective of society as a whole, this was a serious form of underutilisation – it just wasn't measured as such by the abs. given the trend towards part - time and more flexible jobs, people have more options than they had before and many have chosen to join, or have deferred leaving, the labour force. [ 3 ] from the perspective of adding to the productive capacity of the nation, this is a good outcome and if there was a measure of underutilisation that took account of exclusion from the workforce, it would surely have declined. i don't want to downplay the issue of underemployment, but it is worth recognising this broader perspective, and remembering where we have come from. flexibility of the supply side this naturally brings me to my second window into spare capacity in the labour market – the flexibility of labour supply. over the past 2½ years, the working - age population has increased at an annual rate of around 1¾

an unexpected loss of all or part of their income. common reasons for this are the loss of a job, ill health or relationship breakdown. these occur even when economic conditions and lending standards are good. so there will always be some baseline level of mortgage arrears. indeed, from a system - wide perspective, a mortgage arrears rate of zero would be undesirable, because it would imply that lending standards were too tight and that credit - worthy borrowers were being denied access to credit. widespread increases in arrears are driven by macroeconomic factors, in particular : rising unemployment rates, which lead to a widespread loss of income ; rising interest rates, which create a higher regular expense for borrowers ; and falling housing prices, which can make it more difficult for borrowers who are behind on their payments to get out of arrears by selling their property. appropriate lending standards that ensure that borrowers have reasonable income and equity buffers can mitigate the impact of macroeconomic factors on arrears, while poor lending standards amplify their effect. in all states, increases in the share of housing loans that are 90 + days in arrears have been mainly driven by loans remaining in arrears for longer rather than by more loans entering arrears ( graph 2 ). this suggests households are finding it harder to resolve their situation than previously and is consistent with the softer housing market conditions. this is especially so in western australia, where housing prices have been falling for some time. liaison with banks suggests that more lenient https : / / www. rba. gov. au / speeches / 2019 / sp - dg - 2019 - 11 - 15. html 2 / 6 18 / 11 / 2019 mortgage arrears | speeches | rba forbearance and foreclosure policies have also contributed to the increase in longer - term arrears rates. graph 2 financial stability review in the recent, we used the bank's securitisation dataset to look at how different types of home loans have performed in western australia over the past few years. as might be expected, loans that were originated with higher repayments relative to income, and loans with higher starting loan - to - valuation ratios have had larger increases in arrears in western australia. larger increases in arrears have been seen for self - employed borrowers, who tend to have more volatile income than salaried employees. arrears rates for investors have