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Thursday, 11 December 2014





The Australian economy is heading down a slippery slope.
Successive data released by the Australian Bureau of Statistics this
week is all pointing in the same direction. Last week the national
accounts figures showed national growth below trend at 0.3% for the
September quarter, and annual growth at 2.7%.

A growth rate of 3% is necessary just to maintain the existing workforce. Therefore, it was no surprise that Thursday’s employment figures
for November showed a further increase in unemployment of 0.1% to 6.3%.
Worse still was the finer detail. There were only 1800 new full time
jobs created and 40,800 part time jobs. The creation of only1800 full
time jobs in November is a damning indictment of the government’s fiscal

It means the underutilisation rate, i.e. the total of unemployed and
underemployed, has reached 15%. In body count terms that is a total of
1,848,100 people either not working or working reduced hours. That
figure by any measure is a crisis. It is a clear indication that the
government’s economic policy is a failure and shows that Joe Hockey’s
austerity economics is taking precedence over the need to tackle

government in its infinite stupidity still thinks it needs to cut
spending. The lunacy of this thinking can be demonstrated quite simply.
To continue trying to reduce the fiscal deficit while industry is in the
doldrums will lead to depressed output, a continued reduction in the
national income which in turn will cause a reduction in demand; in
short, a never ending downward spiral.

This will lead to further unemployment and less tax revenue, which
means the fiscal deficit will continue to rise anyway. Little wonder
then that the Consumer Sentiment Index also released this week shows further decline and is now down to the same levels experienced during the GFC.

Why is this not obvious to Joe Hockey?

The index was 105 points in December 2013 and today it is 91.1 index
points, a slide of 14% in one year. In fact this decline started with
the end of Kevin Rudd’s fiscal stimulus. These figures may not mean much
to the average man or woman in the street who still has a job, but they
are a sure-fire indicator that worse is to come. That should make those
who are employed, either full or part time, feel very nervous.

In the words of Bill Mitchell, Professor of Economics at the University of Newcastle, New South Wales, “The
Government should abandon their ideological obsession with supply-side
punishment regimes and realise that the unemployed cannot search for
jobs that are not there.”
The government’s policy settings are all
wrong and they will continue to worsen unless a well planned and
executed stimulus is put in play.

If Joe Hockey cannot see what is coming, he should not be in the job.
The present policy of fiscal austerity is counter to the OECD working
paper released December 9, 2014, entitled – Trends in Income Inequality and its Impact on Economic Growth 
by Federico Cingano.  The paper’s major findings were that the gap
between rich and poor was at its highest level in 30 years, that
income inequality and underinvestment in education were the major
contributors to this gap and that promoting skills and learning across
families and youth was paramount in arresting job decline and promoting

neo libAs Bill Mitchell says, “We need a government to get involved in providing public services and infrastructure particularly to low income groups.”
The current neo liberal philosophy of supply side economics is a proven
failure and by pursuing it our government is taking us down a slippery
slope to economic disaster.

And what is our government doing at the moment? They are trying to
stifle youth education and engage in austerity economics in a vain
effort to return to surplus. This is madness. We need a job creation
program now, one that is backed up by skills training in areas that will
increase production to meet demand.

If we continue with Hockey’s austerity program, by this time next
year unemployment will likely be close to 7%, revenues will have further
declined and welfare payments increased to such an extent that the
deficit will break through $50 billion. It is already $34 billion
compared with the May budget estimate of $29 billion.

is no joy in saying those figures will be the end of the Abbott
government. The misery of those who will be unemployed and
underemployed, part of a sub-class of Australians, the legacy of a
failed economic policy, will be more than enough for an incoming
government to deal with. To avoid a looming catastrophe we need a job
creation program now or we travel down the road to perdition in more
ways than one.

But don’t take my word for it. Read Bill Mitchell’s most recent blog.

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