Glimmers of hope on jobs but economy needs fixing

On Thursday Scott Morrison declared “the Australian economy is fighting back”, as he accentuated the positive in the latest job figures. Last month, as restrictions were eased and employers opened doors to staff and customers, employment jumped by 210,800. The economy is clawing back its losses, with hours worked up as well. Women and young people, who have borne the worst of the shutdown, were at the forefront of the mini-revival. Some of those who’d fled the job market came back; the participation rate rose, while more available hours meant the under-utilisation rate, previously at a record high, eased. The headline jobless rate is 7.4 per cent, the highest in 22 years; the Morrison government concedes the true rate is around 13 per cent. The Prime Minister said these labour flows were evidence of more flexible practices, and that wage subsidies were helping workers stay in touch with employers in extraordinary times.

Preserving that link is behind the extension of the wage subsidy for apprentices in the government’s new skills package. There is a huge churn, and thus waste, in training young workers so they can eventually add more value to enterprises. Extra carrots for firms to keep juniors is a reasonable use of taxpayer dollars in a crisis that has savaged the prospects for the least experienced workers. So, too, is more spending on retraining older displaced workers for areas of job growth or skills deficit, especially as imported workers won’t be filling those vacancies any time soon. Canberra is injecting funds into vocational education and training, the province of the states, but is raising expectations on them to achieve better outcomes. The new funding model for training is akin to the health system’s.

VET has long been a neglected policy area, with the system overly complex and opaque for students and parents; different from state to state, in quality and cost; and slow to adjust to industry needs. Mr Morrison offers a lifeline to apprentices until next April, and a boost for school-leavers, but is also reshaping VET so recovery from the pandemic is not hindered. Jobs and skills needed then won’t necessarily be those lost due to COVID-19. Industry restructuring is not only inevitable but also welcome. To survive, businesses are trimming costs and innovating. As a nation, we need capital and labour flowing to high-value industries in the ascendancy; that’s the key to higher productivity, profits and wages. The Morrison government has facilitated an industrial truce of sorts, with unions and employer groups now trying to improve workplace flexibility, simplify awards and accelerate deal-making, among other matters. Their handiwork is due before the October budget.

Josh Frydenberg will provide an economic update on Thursday, including new arrangements for the emergency income supports that run out in late September. The Treasurer has vowed to help households and businesses, especially those exposed to international tourism, manage the transition. The six-week lockdown in Greater Melbourne will hinder the economy and lead to more job losses. The bottom-line budget numbers are likely to be ugly, then uglier, with private economists expecting a deficit of $100bn last financial year and double that for the current one, or 10 per cent of gross domestic product. Extending JobKeeper, or permanently raising JobSeeker substantially, would put the budget further into the red. But not spending more now would lead to lower GDP, higher unemployment and more debt. Snapback is now far less likely, so the Treasurer has an invidious task in finding the fiscal sweet spot.

Yet the main game has not changed. As Mr Morrison recognised in talking up the job numbers, we need a resilient spirit and a more supple economy to regain the lost ground. He has set a bold goal of GDP growth of 3.75 per cent a year for the next five years. On current settings we can’t achieve that; perhaps only in the theoretical nirvana known as Modern Monetary Theory could we engineer that, and hope nobody calls in our tab. The Morrison government has sent faint signals, but not much more, that during this crisis we must repair Australia’s supply side — and go for growth. We have a chance to fix the economy’s rusty pipes, ditch its ancient processes and tribal enmities, make it respond better to price signals, get more from our precious capital and upgrade the skills of workers. It’s the least we need to compete in a COVID-ravaged, slow-growth, high-stress world.