As the implications of China’s change in direction begin to be appreciated in Australia our 'real' unemployment has gone through the roof.
That’s why yesterday’s decision by the Victorian government to defy a Commonwealth attempt to maintain high commercial building costs was so important. Almost certainly New South Wales and Queensland will follow Victoria so we are going to see major falls in the cost of infrastructure on the eastern seaboard.
We will also see lower interest rates but that will not be enough to relieve unemployment and to adjust to China's change in direction (China makes a frightening energy shift, January 7).
Australia is going to need infrastructure investment as we have never needed it before. And we have the capital available to do it via our self managed funds (Allocating Australia's construction army, February 6).
But first let’s look at the grim unemployment statistics that were released by Morgan Research. The official ABS figures at 1130 today showed unemployment remained flat. But Morgan is heralding much steeper rises in coming months.
Morgan calculates unemployment differently to the ABS, which has very restricted questions.
Morgan says in January 2013 an estimated 1.327 million Australians (10.9 per cent of the workforce) were unemployed. This is up 1.3 per cent in a month and is the highest rate of unemployment since January 2002. The graph tells the story.
The high dollar is really starting to cripple our employment creating industries. At the same time our high construction costs have not only made us uncompetitive in mineral development but are making it very difficult to build infrastructure economically.
One of the reasons for the high costs is the ‘sweet heart’ deals between big builders and big unions, which give unions considerable power over building sites and who can be sub contractors. It is estimated that these deals add about 20 to 25 per cent to the cost of major projects because they stifle productivity.
The Victorian government has banned them in its projects and already Lend Lease has been given a ban for entering into such a deal after the cut-off point (Lend Lease strikes out on an unholy union, December 18).
The Commonwealth has responded by effectively saying it allows such deals and that its guidelines should have precedence over the states.
But Victoria is telling the Commonwealth to go jump. New South Wales and Queensland are looking at following Victoria. The simple fact is that most infrastructure spending is state run and financed. It's state taxpayers who must meet most of the cost of the big company/big union deals.
Tony Abbott promises to abolish the deals with a new set of Commonwealth tender guidelines. The only major joint funded Victorian/Commonwealth project close to tender is stage three of the regional rail line. But tender decisions are not required until after the federal election so the conflict will not come to a head until after the election.
Whoever wins the next federal election is going to need to build infrastructure to curb a potential unemployment crisis. That’s why what the eastern states are doing is so important for the nation. The best explanation as to why the Commonwealth would take the stand is that it needs union money to fight the election.