The Australian economy is heading down a slippery slope. Successive data released by the Australian Bureau of Statistics this week all points in the same direction. Last week the national accounts figures showed national growth below trend at 0.3% for the September quarter, and annual growth at 2.7%.
A growth rate of 3% is necessary just to maintain the existing workforce. Therefore, it was no surprise that Thursday’s employment figures for November showed a further increase in unemployment of 0.1% to 6.3%. Worse still was the finer detail. There were only 1800 new full time jobs created and 40,800 part time jobs. The creation of only1800 full time jobs in November is a damning indictment of the government’s fiscal policy.
It means the underutilisation rate, i.e. the total of unemployed and underemployed, has reached 15%. In body count terms that is a total of 1,848,100 people either not working or working reduced hours. That figure by any measure is a crisis. It is a clear indication that the government’s economic policy is a failure and shows that Joe Hockey’s austerity economics is taking precedence over the need to tackle unemployment.
The government in its infinite stupidity still thinks it needs to cut spending. The lunacy of this thinking can be demonstrated quite simply. To continue trying to reduce the fiscal deficit while industry is in the doldrums will lead to depressed output and a continued reduction in the national income which in turn will cause a reduction in demand; in short, a never ending downward spiral.
This will lead to further unemployment and less tax revenue, which means the fiscal deficit will continue to rise anyway. Little wonder then that the Consumer Sentiment Index also released this week shows further decline and is now down to the same levels experienced during the GFC.
Why is this not obvious to Joe Hockey?
The index was 105 index points in December 2013 and today it is 91.1 points, a slide of 14% in one year. In fact this decline started with the end of Kevin Rudd’s fiscal stimulus. These figures may not mean much to the average man or woman in the street who still has a job, but they are a sure-fire indicator that worse is to come. That should make those who are employed, either full or part time, feel very nervous.
In the words of Bill Mitchell, Professor of Economics at the University of Newcastle, New South Wales, “The Government should abandon their ideological obsession with supply-side punishment regimes and realise that the unemployed cannot search for jobs that are not there.” The government’s policy settings are all wrong and they will continue to worsen unless a well planned and executed stimulus is put in play.
If Joe Hockey cannot see what is coming, he should not be in the job. The present policy of fiscal austerity is counter to the OECD working paper released December 9, 2014, entitled – Trends in Income Inequality and its Impact on Economic Growth – by Federico Cingano. The paper’s major findings were that the gap between rich and poor was at its highest level in 30 years, that income inequality and underinvestment in education were the major contributors to this gap and that promoting skills and learning across families and youth was paramount in arresting job decline and promoting growth.
As Bill Mitchell says, “We need a government to get involved in providing public services and infrastructure particularly to low income groups.” The current neo liberal philosophy of supply side economics is a proven failure and by pursuing it our government is taking us down a slippery slope to economic disaster.
And what is our government doing at the moment? They are trying to stifle youth education and engage in austerity economics in a vain effort to return to surplus. This is madness. We need a job creation program now, one that is backed up by skills training in areas that will increase production to meet demand.
If we continue with Hockey’s austerity program, by this time next year unemployment will likely be close to 7%, revenues will have further declined and welfare payments increased to such an extent that the deficit will break through $50 billion. It is already $34 billion compared with the May budget estimate of $29 billion.
There is no joy in saying those figures will be the end of the Abbott government. The misery of those who will be unemployed and underemployed, part of a sub-class of Australians, the legacy of a failed economic policy, will be more than enough for an incoming government to deal with. To avoid a looming catastrophe we need a job creation program now or we travel down the road to perdition in more ways than one.
But don’t take my word for it. Read Bill Mitchell’s most recent blog, and make your own judgement.