From 1954 to 1972, Australia’s official unemployment rate was under 2% as the economy grew at the most rapid rate in the country’s history. There was one exception, the credit squeeze year of 1961, in which unemployment rose to 2.4%.
The June quarter Gross Domestic Product (GDP) figures released by the Australian Bureau of Statistics (ABS) on September 2 took us back to 1961 with nominal GDP growth. This is the measure of the value of all the goods and services produced in the economy. The long-term average nominal growth rate is 5.8%. The June quarter data has nominal GDP growth at 1.8% in 2014-15, the lowest increase since 1961.
The previous March quarter data had GDP growth at 0.9%. The June figures show that GDP growth has dropped to 0.2% in the quarter, with annual growth just 2%. Had it not been for elevated end-of-financial-year spending by state and federal governments, the economy would have contracted.
Two successive quarters of contraction is the usually accepted measure that indicates an economy is officially in recession. Some regional economies around the country fit this description already — such as north Queensland — and so too does Western Australia.
The empirically and conventionally accepted minimum compound growth for all capitalist economies is 3%. The June quarter accounts show that 2014-15 is the sixth year out of the past seven with growth of 2.5% or less. Per capita growth has averaged just 0.7% a year since 2008, down from an average of 2% over the preceding 30 years from 1978.
Disposable income per person fell by 1.2% in the April to June quarter, a fall of 5.1% since 2011. The June quarter ABS data also showed that wage increases per employee were a miserable 0.2%, and just 0.5% for the full financial year. As a consequence, household spending increased by a negligible 0.5%.
While retrenchments are growing, there is evidence to suggest that employers are also unilaterally reducing the hours of work for their employees. The official unemployment figure of more than 800,000 is the highest in 20 years and about 40% of workers are in precarious employment.
The overall effect of this contraction is a reduction in consumer spending which, in turn, creates a cycle of more unemployment in concert with rising underemployment.
The latest data doesn’t take into account the slowdown in the Chinese economy that showed up in July, after the figures were compiled. The effect of this on the Australian economy will only become evident when the September quarter data becomes available.
With trade volumes around the world falling for the first time since 2008, the outlook for Australia looks bleak. Growth in China and other Asian nations is almost certain to fall over the rest of this year and beyond, and these countries take 75% of Australia’s exports.
Treasurer Joe Hockey insisted that the economy is going along just fine, but it would be even better if we signed the China-Australia Free Trade Agreement, increasing the unemployment that will come with it.
More sober observers believe that a recession is inevitable and the latest data supports their assessment.
ACTU president Ged Kearney is reported as saying, “It’s time Tony Abbott understood that jobs aren’t miraculously created just because he talks about them.”
Quite so, but Abbott is unlikely to heed the advice. It is surely time for the peak union body to organise a campaign across the community to lift the unemployment benefit to a living minimum wage.
The likely coming recession is not the fault of the growing number of unemployed, and they should not be forced into poverty to pay for it.