The latest round of retrenchments in the economy will have a profound effect on the nation’s wellbeing. The further fall in manufacturing jobs did not catch us by surprise but the finance sector did surprise. And the banking retrenchments are not just about the decline in economic activity but are a signal for a fundamental change in the industry.
This week I have been exploring the possible reaction from Canberra. (Breaking up a rates ruckus, February 14; Swan song for the RBA, February 13). Today I want to focus on the wider community with the help of Roy Morgan's annual State of the Nation material.
Morgan looks at business confidence by industry and finds that just prior to this banking retrenchment program the finance sector was nearly as confident as the mining sector and achieved Australia’s second-highest rating. People in the industry clearly had no idea of what was going to happen to them. The looming fall in finance industry confidence will have wide ramifications.
This morning’s first Roy Morgan graph divides industries into levels of confidence (you will need to enlarge the graph):
Finance is a huge employer of labour and those employed in the sector are now going to be much more careful in their spending. Down at the bottom of the confidence level are industries like retail, construction and manufacturing – all key employers. Official unemployment figures do not yet reflect this low confidence in key sectors but the Morgan unemployment statistics have already picked it up (Driving into rocky jobs terrain, February 6).
Be ready for the community outrage when the official figures reflect the trends that Morgan has picked up.
In terms of banking, another graph in the state of the nation series caught my attention – it shows where Australians are going online.
A highlight is the use of the internet for banking. This is going to substantially lower the cost of banking. It’s a change just as profound as what is happening in online retailing and means this will not be a happy time for branch banking, which is where much of the employment is situated.
A third Morgan graph shows that the economy is now the greatest area of community concern.
Note the sharp fall-off in environmental concern. Julia Gillard is introducing a carbon tax that on its own might not cost jobs but combined with everything else will not be a happy experience. Maybe I mix in the wrong circles but it seems global warming jokes are now becoming acceptable as economic and political concerns replace concern about the environment.
In our capital cities at a time when retail, construction, and manufacturing are down and finance is about to join them, a tax that puts up prices and contributes to job losses will affect the government – despite the handouts that go with it.
New taxes like carbon are all about timing. If the carbon tax had been introduced by Howard or by Rudd it would not have had anything like the impact and, in my view, would have been acceptable. I must emphasise that for that conclusion to be right official unemployment figures must follow the Morgan trend and rise sharply.