The Times Australia
The Times World News

.
The Times Real Estate

.

Unemployment below 3% is possible for the first time in 50 years – if Australia budgets for it

  • Written by Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University
Unemployment below 3% is possible for the first time in 50 years – if Australia budgets for it

What’s the boldest thing the Morrison government could do in next month’s budget?

It would be to forecast an unemployment rate below 4% (a rate of three-point-something), then to pledge to go further, to two-point-something.

Neither have happened for half a century; not since the long Coalition reign of Robert Menzies and his successors from the 1950s to the early 1970s, when unemployment was between 2 and 3%.

Astoundingly, both are now within Treasurer Josh Frydenberg’s reach in a way they weren’t mere weeks ago.

This time last year, the official budget strategy (its formal title is fiscal strategy[1]) pledged to maintain economic support until the unemployment rate was “comfortably below 6%[2]”.

Frydenberg ditched that target on the ground it was unambitious in the May budget, replacing it with a commitment to spend until the recovery was “secure and the unemployment rate is back to pre-crisis levels or lower[3]”.

But – even projecting forward all the way out to 2025 – Frydenberg couldn’t promise an unemployment rate below 4%. There wasn’t the demand for workers to support it.

Suddenly, below 4% is possible

Even as late as December last year in the mid-year budget update, the best the treasury could forecast was an unemployment rate of 4.25%[4], which wouldn’t be reached until mid-2023 and wouldn’t be bettered in forecasts stretching out to mid-2025.

Then in January, we learnt that in December itself the unemployment rate had dipped below the forecast to 4.2% a year and a half early.

And it was the real thing. The unemployment rate hadn’t been cut artificially by people withdrawing from the search for work because of lockdowns (as had happened temporarily earlier in the year). Unemployment fell by 62,200 in December because an extra 64,800[5] people found work.

Unemployment touching 4%

Seasonally adjusted unemployment rate. ABS Labour Force[6]

The proportion of the population aged 15 and over in work is the truest measure of employment, because it’s unaffected by whether or not someone calls themselves unemployed. In December last year, that had climbed to 63.3% – a record high.

Several countries, including Singapore, South Korea and New Zealand[7], do even better, suggesting we can push employment higher still.

And the jobs have come with hours. All but a few of the extra jobs created over the past year have been full-time. In December the total number of hours worked hit an all-time high. The proportion of workers underemployed (not getting the hours they want) sank to a record low.

The 50-year low is closer than it seems

The unemployment rate was better than it looked. Calculated to several decimal places rather than the usual single place, the December rate was 4.157% – within a hairsbreadth of the historic low of 3.981% achieved in February 2008 at the height of the mining boom; the only time in the modern era the rate slipped below 4%.

To get below 4% from here on, and to get below the previous long-term low, would only require an extra 25,000 people in jobs.

That’s what makes a budget forecast of an unemployment rate beginning with a “3” – the first since the 1970s – suddenly plausible. On Tuesday the Reserve Bank governor[8] and the prime minister[9] said they expected it this year.

Vacancies abound

ABS job vacancies, seasonally adjusted[10] Making something much better plausible – what until recently was a barely imaginable unemployment rate beginning with “2” – is the number of vacant jobs on offer. In November, the Bureau of Statistics survey found a record 396,100 jobs on offer, so many as to mean one job for every 1.7 people looking. The more usual ratio, back in the days before COVID, was one vacancy for every three unemployed people looking. More vacancies than ever If half of those job vacancies (198,000) were filled by someone presently unemployed, the unemployment rate would fall to 2.7%. Which is another way of saying an unemployment rate lower than 3% – an unemployment rate beginning with “2” – is within reach. A budget that forecast a rate lower than 4%, but adopted as a target or stretch forecast an unemployment rate lower than 3%, would make history. Read more: An unemployment rate below 4% is possible. But for how long?[11] It would have to set out the means to achieve it, one of which would be to adopt a new fiscal strategy that committed the government to “invest in a stronger economy” (the words in the existing fiscal strategy[12]) until unemployment is between 2% and 3%. The existing strategy commits the government to invest in a stronger economy until unemployment is down to “where it was prior to the pandemic or lower”. What’s missing? A target and more help for job-seekers The target would delay budget repair by only a few years, and it would make that repair quicker when it started because hundreds of thousands more Australians would be paying tax and no longer claiming JobSeeker. And it would lock in an expectation of permanently lower unemployment, in the same way as the Reserve Bank’s success in crushing inflation in the 1990s locked in an expectation of permanently low inflation[13]. If the government articulated the target, the Reserve Bank would be likely to assist. Full employment[14] is the second of the three goals spelled out in its charter. The government would also have to do much more of what it started in its last budget, which is to set up programs[15] to make unemployed workers more job-ready and make employers more likely to hire them. It’s within reach for Labor, or the Coalition Some of that is already happening as the large number of vacancies and low number of unemployed forces employers to take on people they wouldn’t have before. Many will be glad. Often the only thing that’s “wrong” about a worker who has been out of work for a long time is that they have been out of work for a long time. As employers discover that, they are likely to find it is easier to fill vacancies than they thought. Read more: Top economists expect RBA to hold rates low in 2022 as real wages fall[16] An unemployment target of 2-3% would be game-changing, and it’s within reach. The last side of politics to preside over ultra-low unemployment was the Coalition, making it natural that Morrison and Frydenberg should take up the mantle of Robert Menzies and his treasurer Harold Holt. If they won’t, it’s an opening for Labor. There’s a chance to all but eliminate unnecessary unemployment in Australia. Not in 50 years have we been this close. References^ fiscal strategy (cdn.theconversation.com)^ comfortably below 6% (archive.budget.gov.au)^ pre-crisis levels or lower (budget.gov.au)^ 4.25% (budget.gov.au)^ 64,800 (www.abs.gov.au)^ ABS Labour Force (www.abs.gov.au)^ Singapore, South Korea and New Zealand (data.worldbank.org)^ governor (www.rba.gov.au)^ prime minister (www.pm.gov.au)^ ABS job vacancies, seasonally adjusted (www.abs.gov.au)^ An unemployment rate below 4% is possible. But for how long? (theconversation.com)^ existing fiscal strategy (cdn.theconversation.com)^ permanently low inflation (theconversation.com)^ Full employment (www.rba.gov.au)^ programs (theconversation.com)^ Top economists expect RBA to hold rates low in 2022 as real wages fall (theconversation.com)

Read more https://theconversation.com/unemployment-below-3-is-possible-for-the-first-time-in-50-years-if-australia-budgets-for-it-176025

The Times Features

Best Deals on Home Furniture Online

Key Highlights Discover the best deals on high-quality outdoor furniture online. Transform your outdoor space into a stylish and comfortable oasis. Explore a wide range of d...

Discover the Best Women's Jumpers for Every Season

Key Highlights Explore lightweight jumpers for spring and summer, ensuring breathability and ease. Wrap up warm with cozy wool jumpers for the chilly autumn and winter season...

Uncover the Elegance of Gorgeous Diamond Tennis Necklaces

Key Highlights Diamond tennis necklaces are a timeless piece of jewelry that exudes elegance and sophistication. They feature a continuous line of brilliant-cut diamonds, cre...

Dental Implants vs. Dentures: Which Is Better for You?

When it comes to replacing missing teeth, two of the most common options are dental implants and dentures. Both have their advantages and disadvantages, so choosing between them ...

What Neck Pain Really Means (And Why It’s More Than Just Poor Posture)

Neck pain is often brushed off as something temporary — a tight spot after a long day at the desk or a poor night’s sleep. But when the discomfort keeps returning, it could be a ...

The Work of Gosha Rubchinskiy: Fashion, Culture, and Youth

From Designer to Cultural Architect Gosha Rubchinskiy is not just a fashion designer—he's a cultural force. Born in Moscow in 1984, Rubchinskiy began his career in fashion in t...

Times Magazine

The Essential Guide to Transforming Office Spaces for Maximum Efficiency

Why Office Fitouts MatterA well-designed office can make all the difference in productivity, employee satisfaction, and client impressions. Businesses of all sizes are investing in updated office spaces to create environments that foster collaborat...

The A/B Testing Revolution: How AI Optimized Landing Pages Without Human Input

A/B testing was always integral to the web-based marketing world. Was there a button that converted better? Marketing could pit one against the other and see which option worked better. This was always through human observation, and over time, as d...

Using Countdown Timers in Email: Do They Really Increase Conversions?

In a world that's always on, where marketers are attempting to entice a subscriber and get them to convert on the same screen with one email, the power of urgency is sometimes the essential element needed. One of the most popular ways to create urg...

Types of Software Consultants

In today's technology-driven world, businesses often seek the expertise of software consultants to navigate complex software needs. There are several types of software consultants, including solution architects, project managers, and user experienc...

CWU Assistive Tech Hub is Changing Lives: Win a Free Rollator Walker This Easter!

🌟 Mobility. Independence. Community. All in One. This Easter, the CWU Assistive Tech Hub is pleased to support the Banyule community by giving away a rollator walker. The giveaway will take place during the Macleod Village Easter Egg Hunt & Ma...

"Eternal Nurture" by Cara Barilla: A Timeless Collection of Wisdom and Healing

Renowned Sydney-born author and educator Cara Barilla has released her latest book, Eternal Nurture, a profound collection of inspirational quotes designed to support mindfulness, emotional healing, and personal growth. With a deep commitment to ...

LayBy Shopping