When the global financial crisis (GFC) unfolded in 2008, the unemployment rate for 15 to 19-year-olds looking for full-time work in Australia increased from 15% to 25%. It has remained at this level ever since.
In July, it stood at 25.5%. However, in the 10 areas listed by the Department of Human Services as the most disadvantaged in the country, the youth unemployment rate is more than 40%.
Despite decreasing labour market participation, the present underemployment rate is 13.5% of the workforce. At the height of the GFC it was 13.6%. The share of the working-age population with jobs is now 61.2%, the lowest level since 2005.
The Australian reported on September 13: “There have now been no additional jobs created across the economy since February, while the unemployment rate has risen from 5.4 per cent to 5.8 per cent.”
In a recession-free economy with a long-run participation rate of 66.5%, 210,000 people would have been employed in the year to August, with some 10,000 entrants into the labour market unemployed. But in the past 12 months the growth in the number of employed was 106,000, just half of the longer-run target figure.
The unemployed figure was 90,000 instead of 10,000 even though the participation rate has fallen to 64.3% with 400,000 discouraged workers now outside of the labour market since Labor’s counter-cyclical stimulus spending began to run out in 2010.
Clearly the economy is in serious trouble. The additional 90,000 unemployed is higher than the levels reached during the US stock market crash of 1987 and the Asian financial crisis a decade later. It is approaching the 112,300 that came with the dotcom crash of 2001.
Australia escaped recession and managed its way through the earlier years of the GFC in better shape than most other countries. This was due to $83 billion in stimulus spending (the third-largest in the world, as a percentage of GDP, behind the US and Korea); unlimited guarantees of bank deposits and wholesale funding; resilient demand for iron ore and coal exports to China and a cooperative policy approach that favoured reduced hours of paid work over retrenchment.
Global growth this year is 2.9%, the lowest figure since 2009. Much of the rich world is still in recession or barely treading water. China’s growth forecasts have been lowered from 7.7% to 7.3%. The only other nation more exposed than Australia to a slowing Chinese economy is Mongolia.
Australia’s resource boom appears to be over. Jobs are being scaled back in the mining sector and major projects have been deferred. In the vehicle industry, Ford has announced the closure of its production plants and Holden has yet to decide its long-term future in Australia. The continued operation of several aluminium plants in Tasmania, Victoria and the Northern Territory is by no means certain.
Of the 856,000 jobs created in Australia since November 2007, 38.3% (328,000) were in the private sector and 61.7% (528,000) in the public sector.
If the Tony Abbott government was looking for a recipe for recession, it would cut jobs in the public sector. This would put downward pressure on demand for private-sector goods and services, ensuring further job losses in an already struggling economy.
Yet this is precisely their promise based on a commitment to a neoliberal ideology. As John Maynard Keynes, who knew a bit about recessions and depressions, said back in 1936: “Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.”
Australia has the fourth-highest rate of children living in jobless families in the OECD. Yet in April 2010, Abbott proposed stopping the pitifully low unemployment allowance for all those under the age of 30 in order to “take the pressure off the welfare system”.
The election of the Coalition was dispiriting to those on the left who fought so strongly against it. The time for agonising is over. The time for organising has begun.