The Sydney Morning Herald – 18 February, 2015
By David Potts
We might be selling ourselves short. While nothing flash, the economy isn’t doing too badly, all things considered. What’s missing in action is confidence, for what had seemed good reason.
There’s no mistaking that collapsing commodity prices, especially iron ore and coal, amount to a national pay cut. Even so, we’re working harder to make up for it: miners are digging deeper, so exports are no problem, and your average worker is putting in longer hours.
Which brings me to Joe Hockey, hardly an inspiring Treasurer. But hey, we survived Wayne Swan for seven years and the economy didn’t suffer – yes, I know he ran up a lot of debt, but it’s not us who’ll pick up the tab. Oh, don’t forget to warn the grandchildren about that.
After recent events, I think we can take it as a given that the May budget will be pretty soft, so government spending will be adding to growth.
One business guaranteed to have its finger on the economic pulse, if not elsewhere, is the Commonwealth Bank. Its economists have been the most upbeat of all, with the possible exception of whoever in Treasury does the budget deficit forecasts, and seemed genuinely taken aback that the Reserve Bank should think we need a rate cut, let alone a couple more that have been hinted at.
The bank’s half-year profit shows business investment, the Achilles heel of economic growth as the mining boom peters out, has perked up. Not to where it should be by any stretch, mind you, but business lending is growing by about 5 per cent. That’s better than the impression being given by various surveys of sentiment.
In fact, “reality is ahead of sentiment”, according to the bank’s chief executive, Ian Narev, suggesting there’s a danger of talking ourselves into a slump.
So, how bad are things really?
Even the Reserve Bank is fumbling in the dark and Narev says its rate cut was a “line-ball” call But then, all its decisions are line ball, because it has to gaze into the economic future. When the statistics aren’t clear about where we are, determining where we’re going can’t be all that clear cut.
The most confusing sign has been unemployment – not so much that it’s rising, but that it isn’t higher still, considering economic growth appears to be about 2 per cent.
Perhaps, it’s because the Australian Bureau of Statistics (ABS) has had trouble counting lately and, just like that joke about economists, to some extent assumes the problem away, in this case by changing the definition of who’s looking for work.
The ABS says 103,700 full-time jobs were created over the year to January. Impressive, but then the working-age population rose 338,500.
Incidentally, anybody who has worked an hour during the month – say, getting paid for mowing the neighbour’s lawn – is counted as being employed, albeit part-time.
But the monthly survey by Morgan Poll, which counts anyone who says they are looking for work, no questions asked, located only 80,000 new jobs, only 5000 of which were full-time.
Yet, by Morgan’s count, full-time employment is at a record high, which isn’t bad for an economy that is supposedly spluttering, although to get this in perspective, it claims the real unemployment rate is 9.8 per cent. That is not a discrepancy, because its measure of the available labour force is also bigger. Still, even its unemployment estimate is lower than a few months back.
Taking the two surveys together, I suspect the real picture is that unemployment is about the 6.5 per cent economists have been tipping for some time, but the rate of increase is slowing.
After all, advertised job vacancies seem to be increasing. What is more, the small print in the latest NAB business survey says employment demand is strongest in finance and construction, both labour-intensive sectors.
Anyway, employment is like looking in the economic rear mirror – it reflects how things were about six or even 12 months ago.
And ANZ’s job advertisement tally has risen for eight consecutive months.
So, while the jobs market might not be something to write home about, it’s better than the headlines are saying.
And don’t forget the weaker dollar, which is good for exporters and local retailers, low rates and lower petrol prices. Plus higher property and share prices should be helping confidence no end.