Long queues outside a Centrelink office in March 2020. (Image: AAP/Dan Peled)

In forecasting a jobs boom over the next four years in response to its stimulus measures, the government isn’t being unrealistic. It has achieved a jobs boom before. Problem is, it hasn’t learnt the lessons of that boom.

The budget forecasts that the economy will recover 950,000 jobs over the next four years — based, of course, on the crucial assumption of a widespread COVID-19 vaccine next year. There will be a further 100,000 positions for apprentices at a 50% subsidy while 400,000 people will be on the JobMaker wage subsidy.

That will get the unemployment rate back to around 5.5% by 2024, with the participation rate rapidly returning to just below its former (and historically high) level.

This jobs boom will be an impressive achievement if it can manage it, and it will be the Coalition’s second jobs boom during its time in government. The previous one started when Malcolm Turnbull was PM and Scott Morrison treasurer in 2016. It saw 1.01 million jobs created from December 2016, when 11.96 million people were employed, until December 2019 when 12.97 million people were employed. That boom was the largest seen in this country.

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A surge in residential construction — mainly apartment buildings in Sydney, Melbourne and Brisbane — partly accounted for those jobs, but the key driver was hundreds of thousands created in the service sectors of education, health and social welfare, with the growth in the NDIS a major factor. Nearly a quarter of a million jobs were added in the health and social care sector.

They were created by additional government spending when Turnbull embraced Labor’s Gonski education funding model and increased health spending. The scheduled rollout of the NDIS, and the ongoing ageing of the population and the additional demand on health services it created, also helped. Nearly all the jobs went to women — which is why female participation surged nearly two percentage points in that period.

The lesson from that boom is that direct government investment in services creates jobs — lots of them.

The government has decided not to take the same approach this time. It is taking a gamble that it won’t have to fund those jobs directly, but the private sector will deliver the boom for it driven by stronger household spending, investment write-offs and hiring subsidies.

It’s a big gamble; it relies on taxpayers celebrating their tax cuts with a spending spree and businesses overlooking the poor economic environment to start investing.

One problem with an expectation of a consumer-led surge is that we have just been through a pandemic-induced boom in home office/work products from home electronic goods retailers. Retail sales remain 7.1% above the level in August 2019, and online sales are still surging — they’re up 81.1% higher year-on-year.

The government hopes that growth will accelerate to fuel more jobs. But the consumption surge might be ending — household goods spending, which includes electronic items, fell sharply in August from July, down $360 million and the largest monthly fall since the boom started in February.

The other lesson from the last boom is that private sector-created jobs don’t necessarily lead to higher wages. After years of stagnation, wages growth only briefly reached 2.2% before the pandemic hit, despite the Turnbull jobs boom.

The sectors that had the highest growth were health and social care, and to a lesser extent education. Construction, however, was at the bottom of the pile in terms of wages growth, despite the boom in apartment building during that period.

That wages stagnation is why economic growth declined over the period the Coalition has been in government, and why there were three cash rate cuts from the Reserve Bank in 2019 — in June, July and October, each a trim of 0.25% as the central bank sought to try to arrest a slide in household spending.

Laughably, the government reckons wages growth will “surge” back to 2.25% when unemployment gets below 6% in 2024. The evidence of recent years is that that simply won’t happen.

And the evidence also shows that the best way to a jobs boom is for the government to deliver one itself through investment in much-needed services — not hope and pray that the private sector will deliver.

Is the government barking up the wrong tree? Let us know your thoughts by writing to letters@crikey.com.au. Please include your full name to be considered for publication in Crikey’s Your Say section