An effective jobs and growth plan is a long-term proposition as our economy shifts away from reliance on resources. So the drop in the trend unemployment rate from 5.8 per cent to 5.7 per cent in April means little. More telling is that jobs growth is slowing, making the economic task more difficult for whichever party prevails on July 2. What’s more, it highlights the need to find better ways to reduce the social and economic cost of long-term unemployment.
For the Turnbull government, any doubt over employment prospects makes its “jobs and growth” mantra more difficult to sell. But concerns about work security and availability also show the importance of budget policies such as the coalition’s internships program for under-25s.
While the economy is still creating jobs, annual trend jobs growth has slowed from 2.6 per cent in December to 2.0 per cent in April. While that matches the budget forecast, most of the new jobs are part-time. Full-time employment has shrunk for three straight months.
An extension of the trend could eventually lift the jobless rate and job security fears could exacerbate the reluctance of households to spend in these times of flat wages and low inflation. The central bank expects employment to grow “at a somewhat slower pace” in the next year. It was concerned enough about the economic outlook on budget day to reduce the official interest rate from 2 per cent to 1.75 per cent, thereby limiting its ability to spur activity with further rate cuts when needed.
Slower economic growth and higher unemployment would add billions to the budget deficit over the next four years as more people claimed unemployment benefits and tax receipts shrunk. The budget papers forecast that the jobless rate would fall to 5.5 per cent by the June quarter of 2017. Treasury will release updated economic forecasts on Friday.
The coalition is entitled to argue that its planned business tax cuts are required to encourage job creation, although Labor says relief should not be a top priority.
Where both sides should agree is that governments have a key role in ensuring that young jobless people have the best chance of finding work. The Herald believes that the coalition’s interns plan is a positive development to equip both youth and long-term unemployed with job-ready skills and experience.
The trend jobless rate for 15-24 year olds remained 12.2 per cent in April but on the government’s preferred measure it rose from 12.0 per cent to 12.3 per cent seasonally adjusted. While well down from the recent peak of 14.5 per cent in November 2014, it is more than double the overall jobless rate. A study due next week will examine the related problems of long-term unemployment. One cause is lack of skills that employers require. About one in four unemployed have been out of work for more than 52 consecutive weeks. The long-term jobless rate is about 1.4 per cent, representing more than 170,000 people whose skills and potential are being lost personally and economically.
The coalition’s Youth Jobs PaTH – Prepare, Trial, Hire – is a vast improvement on work for the dole, which is not sufficiently tailored to employer needs, carries a stigma and was wound back slightly in the budget. To read more click here.
The Australian Long-Term Unemployment Conference will be held on the 1-2 December 2016 in Brisbane. To express your interest in the Conference CLICK HERE.