Australia is failing when it comes to unemployment

Thu, 04 May 2017  |  

This article first appeared on the Yahoo7 website at this link: 


Australia is failing when it comes to unemployment

Unemployment around most of the western world is falling at a rapid rate and in many countries it is at a level that is at, or close to, full employment. That means the unemployment rate is low enough to see skills and worker shortages start to appear in some industries and regions and as a result, wages growth is accelerating.

Stimulatory policy settings have driven this favourable outcome, even if those extreme policy settings were in reaction to the economic horrors of the global banking and financial crisis which plummeted much of the world into a recession that threatened to cascade into a depression.

In large part, these falls in unemployment are the result of the success of the unconventional monetary policy actions of central banks – zero or even negative interest rates followed up with huge bouts of quantitative easing have kicked in to support growth, lower unemployment, avoid deflation at the depths of the recession and now it is starting to rekindle much needed inflation.

Unfortunately, Australia has lagged the rest of the world at least in terms of the recent momentum in economic activity and the direction of the unemployment rate.

The unemployment rate is going up and wages growth is going down.

The latest data confirm that the current 5.9 per cent unemployment rate is equal to the peak rate recorded during the global crisis. At the same time, wages growth has fallen to the lowest level seen in close to 50 years, decelerating from 2.6 percent at the end of 2013 to 1.9 per cent at the end of 2016.

The bulk of the weakness in the Australian labour market in absolute terms and relative to the rest of the world has occurred since the election of the Coalition government in September 2013.

National Unemployment rates
Source from national statistical agencies

Country or area      September 2013     Latest     Difference
Australia                  5.6%                      5.9%        +0.3%
United States          7.3%                       4.5%       -2.8%
United Kingdom     7.2%                       4.7%       -2.5%
Canada                   7.0%                       6.7%       -0.3%
Japan                     3.9%                       2.8%       -1.1%
New Zealand          6.2%                      5.2%       -1.0%
Eurozone               12.0%                      9.5%       -2.5%
– Germany              5.2%                      3.9%       -1.3%
– France                10.3%                    10.0%       -0.3%
– Italy                     12.4%                    11.5%      -0.9%

Over the past three and a half years, the Coalition government has been hell-bent on a strategy that places a return to budget surplus and has not structured a policy framework designed specifically to reduce unemployment. The cuts to funding for education and training and the failure to provide a policy framework that has underpinned business and consumer confidence have been hurtful to growth and employment.

From a macroeconomic perspective, the best way to reduce unemployment and drive wages growth to a decent pace is to grow the economy faster. For a national government, this can entail programs focused on infrastructure and other spending in addition to targeted tax policy changes that are designed to be stimulatory and as well as promoting simplicity and efficiency within the economy.

There is an additional policy failure. The Coalition has specifically avoided any attempt to develop policies that would have taken heat out of the housing market. The ongoing house price boom has hamstrung the Reserve Bank of Australia from cutting interest rates more aggressively, as was the case around much of the rest of the industrialised world. Even now, with rising unemployment and inflation well contained the RBA is reluctant to cut interest rates to stimulate the economy and make inroads into unemployment because of house prices in Sydney and Melbourne.

Suffice to say, the economy is not travelling well. Whenever unemployment is high and rising to levels well above the full-employment rate, there can be little doubt that economic growth is too slow and the structural framework is flawed.

The trick for policy makers is to react to this news and work against the rise in unemployment and if the shock that sparks higher unemployment is large and sudden, deliver a quick and sizable dose of economic stimulus.

Over recent years, as policy makers around the world have been striving to deliver unemployment reducing pro-growth policies, their counterparts in Australia have largely been missing in action. The unemployment data show that. It is to be hoped that upcoming monetary policy deliberations and the budget address the economic and social problem of high and rising unemployment.

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The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

Tue, 07 Jan 2020

This article first appeared on the Yahoo Finance web site at this link:   


The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

For many people, the cost of the fires is immeasurable. 

Or irrelevant. 

They have lost loved ones, precious possessions, businesses and dreams and for these people, what lies ahead is bleak.

Life has changed forever.

As the fires continue to ravage through huge tracts of land, destroying yet more houses, more property, incinerating livestock herds, hundreds of millions of wildlife, birds and burning millions of hectares of forests, it is important to think about the plans for what lies ahead.

The rebuilding task will be huge.

Several thousands of houses, commercial buildings and infrastructure will require billions of dollars and thousands of workers to rebuild. Then there are the furniture and fittings for these buildings – carpets, fridges, washing machines, clothes, lounges, dining tables, TVs and the like will be purchased to restock.

Then there are the thousands of cars and other machinery and equipment that will need to be replaced. 

What's ahead for the Australian economy and markets in 2020

Thu, 02 Jan 2020

What's ahead for the Australian economy and markets in 2020

Happy New Year!

2020 will be a year where Australia’s annual GDP will exceed $2 trillion, our population will get very close to 26 million people and we will clock up 29 years with no recession.

It is also a year where the economy will be a dominant issue for policy makers, will drive what happens to interest rates, will help drive investment returns and will feed into the well-being of the Australian community. 

2020 kicks off with relatively good news in terms of economic growth, even though the labour market is likely to remain weak, with wages growth struggling to lift and inflation remaining below the RBA’s 2 to 3 per cent target. The Reserve Bank may have one more interest rate cut in its kit bag, but by year end, the market is likely to price in interest rate increases, albeit modestly.

The ASX, which had a great 2019 is set to be flatten out, in part driven by the change in the interest rate outlook, but it should get a boost from better news on housing and household spending.

In terms of the specifics, I have broken down the 2020 outlook into a range of categories and given a broad explanation on the issues underpinning the themes outlined.

GDP Growth

It’s a positive outlook. A pick-up in GDP growth from the current 1.7 per cent annual rate is unfolding, with the only real issue is the extent of the acceleration.