Increased interest rates, declining working hours and stagnating wages are still chipping away at working people's living standards, despite small falls in the official unemployment rate in November and December.
The decision of the Reserve Bank of Australia (RBA) to leave official interest rates unchanged at its February 2 meeting only highlights the instability and shallowness of Prime Minister Kevin Rudd's "recovery".
Official unemployment declined by 10,600 to 639,400 in December according to the Australian Bureau of Statistics' Labour Force report released on January 14. However, of the 35,100 net jobs created during December, only 7300 were full time.
Underemployment
Underemployment increased in December, with one million fewer hours worked than November.
Professor Bill Mitchell, director of the Centre of Full Employment and Equity at Newcastle University, said on his blog on January 14: "One of the hallmarks of this recession has been the sharp decline in hours worked as firms reacted to the falling sales by adjusting their offering of hours rather than laying off workers…
"All the lost hours [in December] were in female employment — especially evidenced by the significant loss of full-time work in December (8.6 thousand jobs). Further, males are now commanding an almost equal share of the growth in part-time work which further reinforces my view that the recovery will not reduce underemployment."
Underemployment is worst among 15-24 year-olds, Mitchell said. "Broad labour underutilisation remains stuck at 26.3 per cent for the 15-24 years aged group and this is still being largely ignored by government policy. I consider this the worst legacy (burden) that we are leaving our future generations."
The ANZ Bank job advertisements survey for January, which was published on February 1, showed that job ads in newspapers and on the internet fell by 8.1% in January. Falling job advertisements generally flow on to increased unemployment over time.
ANZ acting chief economist Warren Hogan argued: "The monthly decline in job advertisements highlights the fragility inherent in the current recovery phase, but we should see more solid growth rates as we move further into 2010."
The combination of three RBA interest rate rises (from October through to December) along with rapidly increasing housing costs, have meant that almost half of the first home buyers who took out a mortgage in the last 18 months, are suffering mortgage stress, a report released on February 1 by Fujitsu Consulting said, quoted on Smartcompany.com.au.
Fujitsu defines households as being in mortgage stress where they are forced to reduce discretionary or other spending in order to make mortgage payments on time.
For those renting, there are predictions that 2010 may bring new rises in rents. Increasing house prices, and the end of the federal government's inflated first home buyers' grant will put further pressure on rents as fewer renters take out mortgages, the January 13 Sydney Morning Herald said. The article predicted rents in Sydney may increase by over 4% this year.
Global instability
Being geared primarily to the export of commodities, increasingly to China, the Australian economy remains very vulnerable to changes in the global economy.
A measure of the concern in economic circles that the global financial crisis may yet have a further impact on the fragile Australian recovery was marked by RBA governor Glenn Stevens in his explanation for the RBA's decision to keep official interest rates at 3.75% at its meeting on February 2.
"The expansion is still likely to be modest in the major countries, due to the continuing legacy of the financial crisis, resulting in ongoing excess capacity", Stevens argued. "Credit conditions nonetheless remain difficult in the major countries as banks continue to face loan losses associated with the period of economic weakness."
Nevertheless, Stevens promised more interest rate increases over coming months, presuming that "economic conditions evolve broadly as expected".
In fact, the US and European economies continue to remain in deep crisis. According to Susan Watkins, writing in the January/February 2010 New Left Review, the future for the advanced economies is very uncertain.
"These are still early days. But at the start of 2010, the 'recovery' seems patently unstable: a jobless North Atlantic, with a crippled credit system at its heart; a bubbling East, yet to recalibrate to the shrinking market for its goods; a mountain of debt still to be settled; speculative funds at loose in the system, driving commodity-price spikes.
"Finance is still booby-trapped, while turbulence has shifted east and south."
The Chinese economy, on which so much of the Australian recovery depends, is itself inextricably linked with US and European markets.
Watkin said: "How resilient the Chinese economy will prove in face of the cumulative pressures now converging on it — falling US markets, rising commodity prices, excess liquidity from its $600 billion stimulus package and $1 trillion post-2008 credit expansion — remains to be seen," Watkins said.
"Given its current frenzied rate of production, it is hard to see how the [China] can avoid going through some sort of recessionary crisis in the short term, however temporary that may prove."
The threat of a new collapse of the Australian economy, on the back of the ongoing international crisis remains very real, despite official protestations to the contrary. In the meantime, the threat to living standards as a result of stagnating wages and increasing interest rates and prices, remains.