It’s all about jobs; the rest is padding

Labor has failed to deliver on its primary promise of providing full employment and a decent return on savings. That is why it will lose the election.

It’s hardly surprising that support for the Labor government has declined from the dead-heat election of 2010: the official unemployment rate was 5 per cent when it took office and it is now stuck at 5.5 per cent.
In fact that understates the problem. Roy Morgan Research, which interviews 331,000 people each month, puts unemployment at 9.5 per cent and “underemployment” at another 7.8 per cent – a total of 2.1 million people who can’t get enough, or any, work.
The story behind the numbers is that the resource industries are starting to move from construction to the less labour-intensive export phase and the non-mining industries are not picking up the slack. In fact, they are going backwards.
Job advertisements in the mining industry have declined 14 per cent so far this year, while in the rest of the economy, ads have also declined, by 5 per cent.
The nation’s biggest employer – health – has seen job ads decline steadily for two years. In construction ads have just stabilised after falling for two years and in the other big employer – retail – job ads recovered only slightly after the GFC and have also been falling for two years.
The Reserve Bank, part of whose mandate is “to maintain full employment” has been cutting rates for 18 months and has lowered the cash rate from 4.75 to 2.75 per cent. When it started cutting, the official unemployment rate was 5.3 per cent and it has done nothing but go up in the past 18 months.
Put simply: monetary policy has failed and fiscal policy, having worked in 2009, has been paralysed by a single-minded political pursuit of surplus for its own sake.
Whatever “full employment” is, it is not 5.5 per cent and heading higher, yet the central bank seems to have given up. In its most recent monetary policy statement it acknowledged that “the unemployment rate has edged higher over the past year” but it left the cash rate unchanged.
The ALP’s National Platform also commits it to “full employment” – meaning, according to paragraph 7: “everyone who wants to work is supported and able to find a good job in a reasonable period of time.”
Yet the ALP has also given up on this, focusing instead on expanding the funding of education and disability.
The over-riding purpose of a nation’s economic policy is to provide its citizens with employment, as well as sufficient return on their savings that they can live comfortably in retirement – that is, to provide decent incomes when they’re young and middle aged, and then again when they’re old and retired.
On both of those measures of individual welfare – employment and investment – policy has failed. The five-year average super fund return has been 3 per cent, hardly more than inflation, and the unemployment rate has gone up over five years from 4 to 5.5 per cent.
That’s why Labor will lose the 2013 election. The rest is padding and commotion.

Alan Kohler will be hosting two Ashes lunches with Gideon Haigh and Stephen Fay (former editor of Wisden and author of books about The Bank of England and the collapse of Barings) on June 25 in Sydney and June 26 in Melbourne. To book a table click here.

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