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Qld

Jan 21, 2013

Trouble in paradise -- blame shifting on unemployment in Queensland

Unemployment in Queensland has -- unsurprisingly -- increased following the Newman's governments significant cuts across the public service. Blaming others doesn't cut it, says Professor John Quiggin.

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Queensland Treasurer Tim Nicholls has attempted to explain away the latest unemployment figures, which show Queensland pulling up the rate for the country as a whole, as a case of “a weaker global outlook, including uncertainty about the US ‘fiscal cliff’ and a decline in commodity prices” — not the result of state job cuts.

The question that springs immediately to mind is: Why bother? Wouldn’t he be better off with some Thatcherite “no pain, no gain” rhetoric, promising that the cuts his government has implemented will yield pay-offs for all Queenslanders in the long run?

Other things being equal, sacking 14,000 people in a state with two million or so employed workers would raise the unemployment rate by around 0.7%, which is exactly what has happened. Of course, as Nicholls points out, other things aren’t all equal. The mining boom has slowed a bit and commodity prices have come down from their recent peaks, highlighting the dubious timing of these massive cuts. Under boom conditions, public sector workers would have more easily found new jobs.

Nicholls can, perhaps, take comfort that “second-round” effects have yet to show up in the statistics. The nurses, social workers and firefighters his government sacked have less money to spend on goods and services of all kinds. The tens of thousands who were threatened with the sack but ultimately spared would also be questioning discretionary spending. This may affect retail employment over the course of 2013.

Nicholls also tries to blame international events, such as uncertainty over the US “fiscal cliff” in the lead up to the New Year. Leaving aside the question of whether anyone in Queensland, beyond a handful of political junkies like me, paid attention to these tiresome theatrics, any effects would be felt equally throughout the Australian economy. Moreover, the Reserve Bank, which does pay attention to such things, cut interest rates in part to offset the effects of global uncertainty, of which the fiscal cliff was a small part. Assuming the RBA got the call right, there should be no net effect here.

There are some policies that might have been expected to have a more positive effect. Recently, Nicholls issued a press release trumpeting the fact that, despite its allegedly dire fiscal circumstances, the Newman government has raised the threshold for payroll tax, which was already the highest in Australia. Sadly, it appears that the medium-sized businesses benefiting from this move (the core supporters of the LNP government) pocketed the cash, but haven’t hired new staff.

Still, Nicholls looks insightful compared to Premier Campbell Newman who is quoted as saying that Employment Minister Kate Ellis’ statements simply reflect the fact that Labor wants to win seats in Queensland. Well, yes. Newman won his landslide victory almost by default. He apparently finds it startling that, when one side of politics makes a mess of things, the other side tries to take advantage.

It’s hard to recall a newly-elected government that has lost support as quickly and completely as that of Newman, Nicholls and Deputy Premier Jeff Seeney. Rather than trying to blame the messenger, perhaps they should pay some attention to the message they are being sent, in both economic data and opinion.

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