Government inaction spurs 20-year unemployment rate record

August 14, 2015
The last time employment prospects were so depressed was in the 1990s when the national unemployment rate was 8%.

It is now more difficult for unemployed people to find a job than it has been for 20 years. Official youth unemployment is 12% and the official national jobless rate has risen to a 13-year high of 6.3%.

The last time employment prospects were so depressed was in the 1990s when the national unemployment rate was 8%. In South Australia, the official unemployment rate is now 7.9%, with employment growth a negligible 0.3%.

Things are unlikely to change for the better any time soon in South Australia. Recent job losses at BHP, Santos and Alinta Energy are likely to result in an official jobless rate of 9% in coming months.

This week, mining and steelmaking company Arrium will release a strategic review of its operations, after closing its iron ore project in Coober Pedy earlier this year with the loss of almost 600 jobs. The company’s steelworks at Whyalla is bleeding money at a time that it needs investment to upgrade its blast furnace.

Closure of the steelworks, which a number of industry commentators are seeing as a very real possibility, would be devastating for the regional economy of Whyalla with thousands thrown out of work.

The other Australian steelmaker, BlueScope at Port Kembla, is also in some trouble, with the company to announce its full-year results on August 24.

Although the Australian Workers Union (AWU) Port Kembla branch secretary Wayne Phillips does not expect a closure to be announced next week, he is reported as saying that if progress on keeping the steelworks open is not made by the end of the year “things will be extremely grim”.

Just how grim was made clear in a report released last week. Commissioned by the AWU Port Kembla branch, it was carried out by a team of economic modellers from the University of Wollongong.

Ten thousand directly dependent jobs would be lost and several thousand others would be indirectly affected. Closure would create a $3.3 billion hole in the local economy with the loss of 21% of the Illawarra’s Gross Regional Product. The region’s unemployment rate, already significantly above the national rate, would double from the present 8.3% to 17%.

Scott Burrows, one of the economic modellers involved in the study who has been researching unemployment in the Illawarra for a number of years, believes that the effect of the closure of the steelworks would be as bad as the massive job losses in 1982 — a generational effect that is still being felt today.

With backing from the local community, the Illawarra union movement is demanding that state and federal governments enact legislation mandating a minimum of 50% of Australian-made steel be used in taxpayer-funded infrastructure projects.

But support from a federal government that has let the vehicle production and component industries go to the wall is unlikely. Manufacturing’s share of GDP is now less than half what it was at the time of the 1982 retrenchments at the Port Kembla steelworks, and the employment figures in manufacturing for the last financial year of about 900,000 are the lowest ever recorded.

As to where enough economic growth can come from to sustain employment, the Reserve Bank is as bemused as everyone else. At its last meeting it cut its growth forecast for next year by 0.5% to 2.5%. At the same time its expectation was that unemployment would remain steady at 6%. If this forecast is correct, it will be the first time in history that slowing economic growth has not led to increased unemployment.

The federal government’s budget papers has GDP growth at a fanciful 3.5% for the next year. But Prime Minister Tony Abbott does have a plan, of sorts. Last week he put pressure on the Fair Work Commission to cut weekend penalty rates to create jobs.

Yeah, that’ll work. Pushing low-paid workers into penury is bound to solve the unemployment problem.

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