In the wake of a post-Budget dream run and a record low unemployment rate Peter Costello is an upbeat and confident Treasurer. This enthusiasm will be dampened if financial analysts’ predictions about an interest rate rise prove correct. Awash in cash from the resources boom and sustained economic growth, the Howard Government presides over a record low unemployment rate. This has the potential to bring the Coalition within striking distance of Labor at the next election.
The April jobs figures released yesterday widened the Treasurer’s grin with unemployment declining to a 33-year low of 4.4%. This is a Treasurer’s dream, but perversely, it could turn into a political nightmare for the Coalition.
The problem for the Coalition is that it might just spook the Reserve Bank into increasing interest rates in the lead up to the Federal election. This seems to be the consensus view amongst financial market analysts who now think that a rate rise is on the cards in coming months.
This is a nightmare scenario for the Coalition as it will undermine one of their main messages, which is that the WorkChoices industrial laws have generated thousands of jobs in Australia. This is convenient political rhetoric, but the fact is that a stable international economy, the resources and construction booms, a household lending binge and relatively low interest rates have been the drivers of jobs growth in Australia, rather than WorkChoices.
The resources boom has driven unemployment down to 2.7% in Western Australia while the construction and tourism booms have seen unemployment in Queensland decline to just 3.4%. This is something to celebrate but it is not the product of WorkChoices. Rather, it’s the product of sustained economic growth on the back of stable international economic conditions. The problem facing both the Coalition and Labor is that all booms must come to an end sooner or later.