Australia’s unemployment rate continues to defy expectations and appears to reaffirm that the economy is far stronger than expected six months into a major global contraction. Today’s 5.7% figure — an increase of 0.2% — takes us back to where we were in March when a sudden lurch upwards appeared to suggest a rapid ascent to the sorts of damaging unemployment levels seen during the Keating recession. A subsequent surprise revision downwards in April set the scene for a dramatic uptick in a number of indicators, culminating in last week’s shock positive GDP number.
It is now clear that this recession — or whatever else we might call it — is playing out very differently to the ones of the early 1990s and 1980s when interest rate cuts and fiscal stimulus arrived several quarters into the contraction and too late for hundreds of thousands of jobless Australians. Even though it is traditionally a lagging indicator, unemployment should have started escalating toward Treasury’s expected 2009-10 peak of 8.25% by now. At this rate, the June figure may not even reach the expected peak of 6% forecast for this financial year in the recent budget. The growth in part-time work and contraction in full-time work apparent in today’s figures suggests we’re still at the pre-recession point where employers are keeping workers on at reduced hours rather than shedding them.
Significantly, South Australia recorded its third straight reduction in unemployment from the mid 6% highs of summer, and Tasmania also saw a sizeable fall, to 5%. Victoria was flat, and NSW, Queensland and WA all led the way higher, each recording a 0.4% rise, although that’s relative — WA unemployment is still only 5.1%, which until a few years ago was regarded as about as close to full employment as you were likely to get.
For that matter, the national figure is still in the sort of territory that it took years of economic growth to get to, and it seems that the nation’s employers aren’t willing to let it go just yet.
The economy is now making the transition from the sugar-hit of the Government’s cash handouts and low interest rates to the slower but more substantial impact of its short-term and medium-term infrastructure spending, meaning the focus of stimulus activity will shift from retail (another reason for the growth in part-time jobs) to construction. The Government, Treasury and the RBA will be hoping the positive sentiment induced by the handouts and a run of good economic news will be sufficient to prop up retail employment after the handouts disappear, while construction activity ramps up in housing developments and schools across the country.
The Government and the RBA’s success in muting the impact of the global slowdown has so far been a mixture of good management and good luck. Fingers crossed the good luck holds up. All the major “good management” decisions have been made; now it’s a question of implementing them and seeing how they play out.
The Opposition, meanwhile, will try to make much of the rise. For the moment, though, the economic data is flowing against Turnbull and Hockey. They’ll have to hang in there and hope — not that they would ever do such a thing — that the data turns bad again. As Kevin Rudd and Wayne Swan keep insisting, that’s still a possibility.