Election 2022: ‘Beautiful number’ for Coalition

Treasurer Josh Frydenberg and Finance Minister Simon Birmingham on Thursday. Picture: NCA NewsWire / Andrew Henshaw

It doesn’t quite match Paul Keating’s 1995 boast of “a beautiful set of numbers” after strong growth and low inflation figures, but a 3.9 per cent unemployment rate is pretty damn good.

From the pandemic gloom, as lockdowns put the economy into reverse, such a result could not have been contemplated even as emergency monetary and fiscal policies were launched to support household spending.

By going for full employment, the prize for all the pain, officials risked igniting higher inflation with ultra-cheap money and over-the-top stimulus.

During the campaign, Labor has alleged there is nothing to show for a trillion dollars in debt. Well, you can rumble over the waste on JobKeeper, cash handouts and micro-level electioneering, but the scoreboard now shows near full employment.

All things considered, employment is the metric that drives our $2 trillion economy, powering the household spending that makes up the bulk of gross domestic product. Since the last election, there are 555,000 more people in work.

With consumer inflation surging, interest rates rising, real wages falling and chronic budget deficits for at least another ­decade, a robust labour market is the Morrison government’s best claim to sound economic management.

Earlier this month, after he raised the official cash rate for the first time since 2010, Reserve Bank governor Philip Lowe told reporters it wasn’t just the con­fidence vibe that drove the ­economy.

“The real influences on spending are: Do you have a job?” Lowe said. “What’s your wage increase? How much money do you have in the bank? And how much do you have to pay on the mortgage? They’re the drivers of how much we each spend and at the moment people are getting jobs and I expect them to continue to get jobs.”

The RBA chief said that knowing for the rest of the year and likely into next, he will be fighting inflation by raising interest rates.

While trying to normalise monetary policy, Lowe will be closely watching the trajectory of wages, while hoping the jobless rate settles at 3.5 per cent and inflation returns to the 2-3 per cent target range. It’s a narrow path to victory, like the incumbent’s – not impossible.

A tight labour market and renewed job switching after workers stayed put because of Covid-19 disruptions should see the broader measure of annual income growth (which includes bonuses, allowances and overtime) rise to 5 per cent this year, although still lagging the headline inflation rate, which could hit 6 per cent by December.

Treasury, too, has bet the house on full employment. Josh Frydenberg has spent more than $300bn in direct economic support during the pandemic. Finally, it’s paying fiscal dividends.

The global turmoil that is feeding inflation, here and everywhere, is also boosting our national income through record-high export prices, especially for coal and iron ore. That’s given the Treasurer more revenue from miners’ profits and he’s claimed a $100bn turnaround in the budget since Christmas.

But the improvement in the bottom line has also been driven by a $100bn payoff from the recovery in the labour market. More people in work and rising wages translates into more tax revenue and less spending on welfare.

The lowest unemployment rate since 1974, falling under-­utilisation and near record high workforce participation is a fantastic base for whoever wins on Saturday.

Then for the real work of the next term: fixing the budget by getting spending under control and fortifying the revenue base; making the economy-wide transition to cleaner energy at least cost; and enhancing the way we use our precious labour and capital to lock in higher living standards.

Now that would be a beautiful trio of achievements.