Andrew Leigh

The business of being in Opposition is to hold the Government to account. The Guardian today published my piece on the Prime Minister's jobs target.

OPINION PIECE



Unemployment: Abbott needs 1,007,000 more jobs to keep his promise



One of the great inkblot tests of modern politics is how you think about unemployment. While progressives tend to think in terms of social forces, those on the right are more likely to see unemployment as a personal failing.

You can hear echoes of this view from conservative politicians. Social Services Minister Kevin Andrews has announced he will be ‘reining in welfare’, while Abbott Government backbencher Ken O’Dowd has argued that welfare recipients ‘don't care about the community, they care about themselves and how they can screw the system’.

To see the oddity of blaming the victim, you only have to take the argument to its logical conclusion. Since the Abbott Government was elected, more than 7000 jobs have been lost. Is this because we’ve seen a surge in laziness among Australians? Did the millions who lost their jobs worldwide in the global financial crisis just decide to put their feet up? Was the Great Depression the result of a historic collapse in the work ethic?

Realising that unemployment is driven more by the macro-economy than morality is important because it brings the focus back to where it should be. As Clinton strategist James Carville put it, ‘It’s the economy, stupid’.

Before the election, Prime Minister Abbott campaigned hard on economic growth and job creation, stating: ‘I am so confident that we can deliver a million new jobs over five years.’ Yet the target seems to be slipping away from him. Almost half a year in office, and Mr Abbott now needs to create 1,007,000 jobs to keep his promise.

Australians recognise that there are many forces in the economy that are outside the control of government. When it comes to economic policy, people aren’t looking for Moscow on the Molonglo, but for a sense that the important economic settings are right: in the short and long term.

In the short-term, getting the settings right means ensuring that the government takes account of the economic cycle when making its budget decisions. With unemployment on the rise, is this really the right time to be axing thousands of jobs in the Australian public service? From regional tax offices to AusAID, public servant job losses are adding to unemployment pressures.  And yet there’s no evidence of a ‘bloated’ public sector: after all the number of public servants per capita did not rise under Labor.

In a fragile labour market, the Abbott Government needs to rethink the impact that its decisions have on growth. Because the poor have a higher spending rate than the affluent, the hit to demand from removing the SchoolKids Bonus and cutting income support will be significant. At the same time, it’s easy to see the removal of the Mining Tax having little positive impact on demand. If the government cuts family payments on low-income families, those families will spend less. If it pays the wealthiest families $75,000 to have a child, these families may simply choose to save a bit more.

And then there’s the long-term. The progressive view of economic growth is that it depends on education, infrastructure and openness. That’s why Labor opened up university places, took us from 20^th to 1^st in the OECD for infrastructure investment, and commissioned the Australia in the Asian Century White Paper.

These decisions need to be built on if Australia is to have more good-paying jobs in the future. And yet it’s worrying to see the scrapping of Trades Training Centres, the failure to build a fibre-based NBN, and the decision to turn away US foreign investment in GrainCorp.

Wage cuts and asset sales are a poor recipe for the nation once known internationally as ‘the Workers’ paradise’. In the future, Australia must be better-educated and have speedier transport networks; we must be connected to the world’s information superhighways, and we need to be open to trade and investment from our region.

Smart investments for the future will not only help to bring down the unemployment rate; they will also help to boost productivity. Over the past decade, we’ve experienced a historic rise in the terms of trade (the ratio of the price of what we sell the world to what we buy from the world), which has helped to mask a period of sluggish productivity growth. As the terms of trade decline, we need productivity-boosting measures more than ever before.

Even amidst the Global Financial Crisis – the world’s worst downturn since the Great Depression, Australia had better labour market figures than it does today. The unemployment rate is at an 11-year high, and the participation rate is at an eight-year low. As a nation, we can do better. It’s time to get Australia working again.

Andrew Leigh is the Shadow Assistant Treasurer, and his website is www.andrewleigh.com.

ENDS

Wednesday, 19 February 2014

Published in The Guardian, Australia edition