Thursday, September 17, 2009

OECD on Australia's stimulus measures - the graph

The full report is here (Australian references pages 29 to 32)

Tim Colebatch outlines its thinking below:

It's working - OECD supports Labor stimulus

Australia’s jobless rate would be as much as 1.9 percentage points higher in 2010 without government handouts to consumers and infrastructure spending, the Organisation for Economic Cooperation and Development says.

“Job losses would be significantly higher if vigorous macroeconomic measures had not been taken,” the Paris-based group said in a report released overnight.

Between 150,000 and 200,000 jobs would have been shed in 2009, the OECD believes, had the stimulus measures worth $42 billion not been applied.

While stimulus measures in most countries haven’t had a “strong effect” in cushioning the drop in employment amid the deepest global recession since the 1930s, “Australia is a notable exception,” the OECD said.

The jobless rate held at 5.8 per cent last month, compared with 9.7 per cent in the US, 9.5 per cent in the euro region in July and 5.7 per cent in Japan.

The OECD report “underscores the vital importance of delivering our stimulus measures in full to keep as many Australians in work as possible,” Treasurer Wayne Swan said today.

Mr Swan this week rejected criticism of government stimulus by opposition parties, who argue the spending should be wound-back to reduce debt.

The Treasurer noted Australians are working substantially fewer hours and earning less income in the current economic downturn.

But Mr Swan said Australians were confident about the future of the economy.

"Certainly we're happy with their (OECD) evaluation but we're happier about the impact it's had in terms of supporting employment,'' he told Fairfax Radio Network.

"We moved early and we moved with a very significant economic stimulus and I think what the OECD report shows is that moving early, putting that in place early, certainly did have a dramatic impact in terms of the job outcome.''

Mr Swan said there was no doubt there had been a "substantial reduction'' in working hours, leading to a reduction in income for workers.

"Certainly unemployment has not risen as much as what's expected to happen. That's a good thing but one of the things that has happened out there is that many people are working fewer hours.

"That's why the economic stimulus has been so important, to boost employment across the board, particularly in retail, particularly in construction.

"What we have managed to do in Australia is keep a lot more confidence about the future.''

Mr Swan also defended the government's emphasis on supporting jobs rather than providing financial assistance for the unemployed.

The OECD outlook showed that 55 per cent of jobless households in Australia were "relatively poor'' compared with a 37 per cent average across OECD nations.

Australia's tax and transfer system - targeted towards low-income earners - reduced the risk of poverty among working households but was less successful in tackling poverty in jobless households, the OECD found.

"Well, jobs have been our number one priority from day one,'' Mr Swan told ABC Radio when asked about the finding on Thursday. "We have put in place from day one much more support to ensure those who are looking for work can get the qualifications they require.''

The government had responded to rising unemployment and the global recession in a "timely and powerful'' way with its economic stimulus, Mr Swan said.

The OECD said under-employment was leading to increased dissatisfaction among Australian part-time workers.

Mr Swan acknowledged some people were working fewer hours than they desired but put it down to the "extraordinary'' response of employers and employees to safeguard jobs.

OECD Employment Outlook Pages 29 - 32

Australia Briefing