By Peter Boyle
The unemployment rate jumped from 9.3% to 9.8% in July, dampening weeks of media speculation that an end to the recession was in sight. Some 83,000 more jobs were lost, bringing the total number lost in the last year to 305,000.
Unemployment was highest in Western Australia and Victoria. Youth unemployment surged to 28.5%.
Yet many economists and the federal government insist that a recovery is already under way. They rely on information gathered before the latest figures were released:
- a slowing down in the decline of job advertisements;
- small increases in the number of building and finance approvals for housing;
- surveys showing business people expect the economy to improve.
However, while their public stance is "a recovery is in sight", there have been some quiet words of caution to big business leaders. National Australia Bank's chief economist, Julian Pearce, warns that a recovery will be later and a lot slower than most people expect: "Although the signs are strengthening that the economy will eventually [!] begin to recover ... we are still in the midst of a recession as severe as any since World War II".
Pearce warned that the only real evidence of improvement was in housing figures, but that higher unemployment and decreasing immigration (net immigration has actually halved in the last year) will depress demand for housing. Other commentators have pointed out that the rise in housing approvals may reflect the once-off return to the market by buyers who were waiting for interest rates and housing prices to fall a little.
The commercial building sector remains totally depressed. Thanks to the real estate speculation boom of the 1980s, there is an oversupply of office space that could last 10-15 years.
Ironically, the speculative boom that gave the Hawke government 1.5 million new (mostly part-time) jobs in the mid-1980s is now retarding a domestic recovery. Reduction of wages through the Accord and the creation of artificial markets through the credit spree launched by the deregulation of financial institutions are now depressing domestic demand.
People don't have as much money to spend, and banks are wary of lending for new investment. Even if incomes recover a little, many people will restore their eroded savings rather than spend up.
The NAB's survey showed that the economy is operating at only 75.2% of capacity. A recent Business Age survey found that, even if there is a recovery soon, several major corporations have indicated that they intend to re-employ only about 20% of workers they laid off.
The recession has sped up restructuring of the economy, which has been forcing less competitive manufacturing firms to close down or scale down since the 1970s. This is one reason why unemployment is so much higher in the manufacturing state Victoria.
But while some new, more competitive industries may rise in their place, these new industries are likely to use more labour-saving new technology. Thus even the most optimistic restructuring scenario means fewer jobs.
The high unemployment rate is placing some pressure on state and federal Labor governments. But while federal treasurer John Kerin sang the praises of Keynes in a recent speech, the government seems determined to continue cutting spending and maintaining high interest rates.
This means that it has decided to prolong and deepen the recession. The only possible source of new economic activity, in the face of a private sector reluctant to make new investments, is the government.
The Hawke government refuses to break from the Thatcherite monetarist policy it has implemented since coming to power. If it increased spending on public works and services, it would not be able to continue redistributing income to the rich through tax cuts and privatisation.
Now that it has eroded wages and union morale, it faces a business sector demanding permanently high unemployment in order to keep wages down. This is bad news for the ACTU, which had hoped to continue as the main instrument of wage control through the Accord. High unemployment and a demobilised union movement now have rendered the Accord itself increasingly irrelevant.
Industrial relations minister Peter Cook mentioned the prospect of negotiating an Accord Mark VII deal. He met with embarrassed silence from ACTU officials, who are sweating over the spectacular collapse of Accord Mark VI, as evidenced by the mere 2.5% increase in nominal award wages in the 12 months to May. Accord Mark VI promised a total package worth at least 7%.
Spurred on by desperate small businesses, the federal opposition
favours lower interest rates and even harsher wage cuts to compensate. Low interest rates would spark off a quicker recovery (if only another one based on speculation), but would a Coalition government be able to hold back wages in such circumstances? This is what its credibility with corporate Australia hangs on.
Australian National University Professor Bob Gregory says that recessions are getting deeper and the business cycles wider. Long-term unemployment is not going to disappear for at least a decade. There are increasing predictions that, even with a recovery, unemployment will stay around 10% until next year.
The Australian economy, as always, will depend mainly on the international economy. No-one is predicting a rebound in international commodity prices. The English-speaking countries are still in recession, though there is much talking up of a bottoming out of the recession in the US.
Japan and Germany are not in recession, but the Dai-Ichi Kangyo Bank reported in June that the were increasing signs of a major slowdown in Japan. The Organisation for Economic Co-operation and Development's recent half-yearly report (dubbed optimistic by many economists) predicted only a mild recovery in the industrialised countries in 1992.