Reserve Bank of Australia points to Victoria’s high unemployment rate in economic warning

Victoria’s economy has been called out by the Reserve Bank as among the weakest in the nation — here’s the pain point which has the top economic boffins on edge.

Victoria’s economy has received a less than glowing reivew from the Reserve Bank of Australia — and one key graph has the central bank more worried about the state than pretty much any other.

RBA assistant governor Sarah Hunter singled out the Victorian economy as one of the worst-performing in the nation during an appearance at a parliamentary committee.

“Victoria is really struggling right now,” the economic boffin said on Wednesday.

“We are aware, for some people right now, it’s really tough.”

When the Herald Sun asked the RBA what had it on edge about the state’s economic position, it pointed to a graph of the state’s unemployment rate which stands a 4.5 per cent.

That is the highest in the nation and well ahead of the 3.9 per cent posted in New South Wales and South Australia and 4 per cent in Queensland.

The RBA has called out Victoria’s unemployment rate, the highest in the nation.

RBA assistant governor Sarah Hunter said Victoria is doing it tough. Picture: John Appleyard

AMP chief economist and head of investment strategy Shane Oliver said the Victorian economy was at “the bottom of the heap” in Australia, likely a “hangover from the pandemic”.

“It’s the bottom of the pack... employment growth is below average,” Dr Oliver said.

“Growth in state final demand is the equal lowest. Building approvals are down the most and retail sales are the second weakest across a whole range of indicators.”

Dr Oliver said the state’s economic headwinds were “multifaceted” and the veteran economist was not confident the economy would grow at the same rate as the rest of Australia.

“If Victoria follows the national profiling and the RBA forecast is correct, then you should start to see things pick up soon,” Dr Oliver said.

“I’m a little bit sceptical — I think the impact of higher interest rates is still vetting through, and that will particularly show up in higher unemployment in Victoria.”

An empty shop for lease on Elizabeth St in Melbourne’s CBD. Picture: David Crosling

AMP Capital chief economist Shane Oliver. Picture: John Appleyard

Job insecurity was likely to be the most widely-experienced effect of the economic strife, Dr Oliver said, although “most people keep their jobs”.

“It will likely be harder to ask for a wage rise – so financial stress would probably continue to increase, probably seeing more people defaulting on their loans or falling behind in their payments,” he said.

“Tougher times often take pressure off the property market in terms of rents, lower rental growth as more people are forced to share or stay at home with their parents longer.

“The tough economic times are generally associated with increased financial stress, lower levels of confidence, and a lot of it relates to higher unemployment.”

Dr Oliver noted the last time Victoria pulled itself out of an economic slump, it required a total statewide revamp.

“The government came in and sold off a lot of public assets and encouraged the construction of the freeways about Melbourne and elsewhere, which sort of re injected life into the state,” he said.

“Ideally, it did something like that to reinvigorate things. But it’s been hard at present because there’s not as many assets to sell off anymore.

“Secondly, the state government’s having a lot of difficulty completing existing projects because of material shortages, labour shortages and cost overruns,” he said.

“There’s probably no easy way around this.”