Jobless ranks to swell as mining boom fades in Joe Hockey’s first Federal Budget as Treasurer

UNEMPLOYMENT at six per cent, shrinking pay packets, public sector job cuts and the long hard road back to surplus: welcome to the brave new world of ‘Hockeynomics’.

The economy ... a surplus is not expected again until the 2019-2020 financial year.

THE nation’s jobless rate will top six per cent for four consecutive years as the Australian economy undergoes a painful transition to the end of the mining boom.

Paypackets will shrink this financial year as wage increases are gobbled up by rises in the cost of living.

Budget spending cuts and tax hikes will sap some strength from the economy, but nowhere near enough to create a recession.

Any reduction in household spending and growth will be offset by the Reserve Bank. Interest rates are likely to remain on hold for longer as households absorb the budget pain.

Housing ... budget conditions are likely to mean interest rates will stay steady.

“The faster pace of consolidation in this budget does not have a material impact on economic growth,” the budget papers say.

It will however, shrink deficits and debt.

Hockey’s first budget delivers a deficit of $29.8 billion in its first year, falling to $2.8 billion in 2017-18. Taxes and spending will be roughly in balance by 2018-19 and Australia should see its first surplus in more than a decade by 2019-20.

Net debt will keep rising, however, from $226 billion to $264 billion as the government borrows to fund deficits.

However, as a share of the economy, net debt will remain steady at about 14 per cent for the next four years.

The budget papers present a bleak picture of the economy’s fortunes for the Abbott government’s first term.

“The Australian economy is in the midst of a major transformation,” they say, as the biggest mining boom since the gold rush days comes to an end.

After the boom ... economic growth will continue but at a slower rate. Picture: Ian Waldie/Bloomberg

Australia’s two-decade-plus run of economic growth will continue, but at a slower pace. The economy will grow by 2.5 per cent in the coming financial year and 3 per cent the year after.

A housing construction boom will help offset shrinking business investment in the mining sector.

But falling commodity prices will continue to put the brakes on investment.

The number of jobs available will grow by a slim three quarters of one per cent this financial year — not enough to keep up with population growth.

The jobless rate will rise from 5.9 per cent today to 6.25 per cent by mid next year. It will stay there until well after the next election, falling to 6 per cent by mid 2017 and again to 5.75 per cent by mid 2018.

Meanwhile, inflation will hit 3.25 per cent this financial year, while wages will only grow by 2.75 per cent — meaning workers go backwards after the cost of living.

“Australians have high living standards relative to the rest of the world, and these have been boosted by rapid growth in incomes over the past two decades ... [but] Australia now faces a number of challenges that are likely to slow growth in incomes.”

DEFICIT NOW: $29.8 billion in 2014-15

SHRINKS TO $2.8 billion in 2017-18

NET DEBT NOW: $226 billion in 2014-15

STILL CLIMBS TO $264 billion in 2017-18

GROSS DEBT BY 2023-24 WITH NO ACTION: $667 billion

GROWS ONLY TO $389 billion AFTER THIS BUDGET

Originally published as Jobless ranks to swell as mining boom fades in Joe Hockey’s first Federal Budget as Treasurer