While jobs growth has been a success story for the Turnbull government over the last two years, a closer look at employment data suggests its economic policies deserve little credit. Instead, growth has been driven by social services spending and the Reserve Bank’s ultra-low interest rates.
According to ABS data, between November 2015 and November 2017, employment grew by nearly 520,000 in trend terms, or around 4.3% — noticeably faster than growth under the Abbott government, which managed only 3.8% growth between November 2013 and November 2015 (Abbott and Joe Hockey were replaced in September 2015). The strong growth under Turnbull and his Treasurer Scott Morrison has driven unemployment down to 5.4% (again in trend terms; all figures here are trend), its lowest level since early 2013.
But while the government has been justifiably eager to boast of getting unemployment back down to the levels of the Gillard-Swan mining boom years, the composition of that growth suggests the idea of a private-sector jobs market powering along isn’t all it’s cracked up to be.
In the 12 months to November 2017, the health and social care sector alone provided more than 124,000 of the 395,000 jobs created in Australia — nearly a third. That came after the sector had a brief pause in its long trajectory of growth stretching back decades — in 2016, employment in health and social care barely shifted at all across the year, before surging again in 2017. Meantime, education provided a further 50,000+ jobs in the 12 months to November, on top of around 36,000 in 2016.
As a result, health and education provided just under 45% of all new jobs in net terms in the 12 months to November, and 42% of the 517,000 net jobs created over the two years to November.
In comparison, the private sector struggled to compete as a source of growth. One of the powerhouses of employment in Australia, construction, provided 91,500 jobs in 2017 as the east coast urban building boom — fueled by the Reserve Bank’s record low interest rates — and state government infrastructure projects ramped up. But that followed a weaker 2016 for the sector, so that over the two years, construction provided 23% of net new jobs. The other strong sector was accommodation and food services, illustrating that Australia’s love affair with cafes and restaurants continued unabated: that provided 75,000 jobs over the two years to November, or about 14%.
Manufacturing, however, contracted last year despite the new protectionism that dominates on all sides in Canberra — that sector lost over 40,000 jobs in 2017, almost wiping out all the growth that occurred in 2016. Mining, never a big employer despite the incessant lies of the Minerals Council, shrank 7000 in 2017. Professional services — which in the Labor years was one of the fastest growing sectors — was almost flat over the period 2015-17. But retail, after a very weak 2016, put on 60,000 jobs in the year to November, despite poor consumer spending.
To give some historical context, compare the mix of growth in the period 2015-17 to growth in the last years of the Howard government, when unemployment dropped to around 4%. These are the biggest sources of jobs growth from the two periods:
The government can still claim credit for part of this jobs growth: the surge in education employment has come in pre-school, childcare and school education — all areas where government funding has played a role and the government has increased funding. Responsibility for the big rise in health jobs is shared with the states though, because much of it has come in hospitals rather than primary or private healthcare, and both state and federal governments provide funding for the acute care system.
The Turnbull government isn’t the first to have jobs growth dominated by health and education. In 2009, as the financial crisis hit the economy, they provided 175% of jobs growth — that is, without them, employment would have shrunk in net terms. And in 2015, almost half of all jobs growth came from the sectors. But ideally we’d return to the mix of 2005-07, when government-dominated sectors played a limited role and the bulk of jobs growth came from the private sector. On that score, we went backwards in 2017.