Wednesday, November 12, 2008

Now it's a "war on unemployment"

The Prime Minister says so, and it's certainly needed.

Tip for
Julie Bishop: This is the right way to describe employment forecasts. You can do it too.

THE Prime Minister has declared a "war on unemployment" as business confidence falls to its lowest level on record.

Telling parliament he would "not stand idely by" as unemployment climbed, Mr Rudd said creating jobs was his highest priority.

The National Australia Bank business survey found confidence collapsed in October, sliding to its lowest level on record despite that month's decision by the Reserve Bank to slash interest rates by 1.00 percentage points. The employment index slid to a 7-year low, consistent with what the NAB called "upward pressure on the unemployment rate".

The Treasury Budget update released last week predicted anemic jobs growth of only 0.5% this financial year, down from 2.5% in the previous year. But as employment has already grown by about that much it implies no jobs growth whatsoever in the rest of the financial year. The Reserve Bank predicts almost zero jobs growth throughout all of 2009, suggesting that in net terms no new jobs will be available in the coming year for the extra 225,000 Australians due to begin looking for work.

That would push Australia's unemployment rate up from 4.3% to 6.2%, and the number of Australians unemployed up from 488,000 to more than 700,000 for the first time since 1998...

The NAB measure of business confidence plummeted 20 points to minus 29 in October, its lowest level since the series began in the early 1990s. The NAB measure of current conditions plunged 10 points to minus 11, a level "more consistent with a recession than a slow growth outcome," in the assessment of TD Securities economist Joshua Williamson.

"The size of the fall is reminiscient of the collapse in confidence in Australia at the time of the September 11 attacks in the United States," said UBS economist Scott Haslam. "The issue is the extent to which confidence remains at what is clearly a recessionary level."

Around one quarter of the businesses surveyed said they were finding it harder to obtain credit. More than one-third expected credit to become still tighter.

Mr Rudd said Australian businesses were losing confidence in the same way as were businesses "in practically every other developed economy in the world".

"If you look at the surveys of business confidence in the United States, the United Kingdom, France, China, Germany and Italy, you will see they are all heading downwards, and that is because of the global financial crisis. The global financial crisis has impacted on financial markets, which have affected equity markets, which have affected property markets, which have affected the real economy and jobs."

"I regard war on unemployment as the government’s highest priority, the Prime Minister told parliament. "Those opposite presumably would have us stand idly by as the world at large experiences increased unemployment." His call echoes that of the Opposition Leader Malcolm Turnbull who last week called for a total focus on "jobs, jobs, jobs".

Mr Rudd said the $10.4 billion economic stimulus package and the collection of $1,000 cheques due to be mailed out or deposited into accounts on December 8 would "help to create up to 75,000 additional jobs". But the package was factored into the Treasury forecasts that last week predicted no further jobs growth this financial year. This could mean that the Treasury expected employment to plummet in the absence of the package.