By Chow Wei Cheng
The federal budget on May 9 contained very little for the 8.3% of the labour force officially classified as "unemployed". In effect, they were told to sit and wait for the economy to pick up. The problem is that the economy will probably never pick up sufficiently to provide jobs for many of them.
The lack of serious budget action and the government's treatment of the latest unemployment figures as a great achievement indicate that an unemployment rate of around 8% is to be treated as "normal" or "natural".
In the week of the budget it was announced that 700 workers will be laid off as a result of the Caltex merger with Ampol, as will 200 of the 700 staff at Mobil's head office; and 1250 workers will lose their jobs at ANZ Bank as part of the plans of the big four banks to lay off 25,000 workers over the next few years.
In the budget speech Treasurer Ralph Willis said that the Australian economy has been growing for 3.5 years, and is now growing at around 4%. Employment has grown by 4.2% over the 12 months to March; the number of long-term unemployed has fallen by 25% over the same period.
What he neglected to say is that jobs growth is already slowing. According to economists at J.P. Morgan, the annualised rate of jobs growth in the December quarter dropped to 3.1%, down from the previous quarter rate of 5.9%.
Unemployment has two components, long term/structural unemployment and short term/cyclical unemployment. The budget addresses only the cyclical component of unemployment which is the part that has been reduced.
Short term
Australia's recent economic growth is due to the growing Asian economies, a commodity boom and the normal bottoming out of the business cycle.
This growth leads to increases in employment and inflationary pressures. To prevent inflation the common treatment is to increase interest rates. The increase in interest rates causes asset prices (such as bonds and shares) to fall.
The government could try to reduce economic growth as the original source of inflationary pressure. This is why the financial press call for a "tough budget" and also part of the reason the government wants a budget surplus.
Keating and Willis, however, have a different plan they are trying to sell to big business. The government plans to deliver growth without inflationary pressure through "changing the structure of the economy".
This involves reducing "cost structures" (a national training wage), flexibility, enterprise bargaining, increasing productivity, competition policy and "micro-economic reform".
All this adds up to one thing: we work harder and longer for less money.
Long term
The long-term component of unemployment is not addressed at all except in the "Working Nation" report. The "solution" there is more training and case management.
These measures don't deal seriously with the two main causes of long term structural unemployment: the increase in productivity of labour due to technological change and the growth of permanent speculation.
The largest growth experienced in all sectors of the economy, according to the Australian Bureau of Statistics, is communications and information technology, which grew a staggering 56.3% over the five years to September 1994.
An example of the scale at which technology is replacing labour is the construction giant Caterpillar in the US. Through investment in information technology, Caterpillar has almost doubled output with one third fewer employees.
Technological advances relieve humanity of a lot of the most laborious tasks. Rather than sacking workers, the remaining work should be shared around, with no loss in pay, so that we each can enjoy more leisure time.
The second cause of long-term unemployment is the growth of speculative capital. Speculation — i.e., gambling on the future price of something — no longer occurs in a cyclical fashion or in periods of high inflation like the '80s.
Financial deregulation has meant that interest rates and exchange rates fluctuate with market forces. Combined with computer technology, this has led to a proliferation of complex ways of speculating. Today you can even "buy volatility" and make a profit out of movement in either direction in an asset's price.
As there is usually an easier buck to be made from speculating than from investing in production, large amounts of capital are permanently syphoned away from productive uses. Today 95% of world currency flows are completely unrelated to real trade.
The only means to address this is greater public control of the finance sector and the economy generally. The government is going in the opposite direction and handing the Commonwealth Bank over to private enterprise.