Looks like we wasted the mining boom after all

THE problem with a slowly deteriorating labour market is that there generally is nothing much to see from month to month. But as the months and years pass, all of a sudden the unemployment rate no longer has a four in front of it, or a five, but a six.

And instead of the unemployment rate being in the low sixes, it begins to move to the middle sixes, and we are now asking the question whether unemployment will exceed 7 per cent.

Using the more reliable trend figures, we can see how labour-market conditions have slowly worsened. In July 2011, the trend unemployment rate stood at 5.1 per cent. A year later it was 5.2 per cent. In July last year it was 5.7 per cent and last month it was 6.1 per cent.

In this time employment has been growing, but at an insufficient pace to mop up the increase in the labour force. If not for the declining participation rate, some of which is due to baby boomers moving into retirement, the rate of unemployment would be higher again.

Even so, the rate of unemployment among young people aged 15-24 is more than 14 per cent.

Around the time of the global fin­ancial crisis, our economic ministers bombarded us with the message that Australia’s rate of unemployment was the envy of developed economies. Any boasting about Australia’s enviably low rate of unemployment must cease immediately.

Australia’s seasonally adjusted rate of unemployment of 6.4 per cent means that a number of significant countries have lower or equal rates of unemployment, including Austria, Germany, Japan, South Korea, New Zealand, Norway, Singapore, Switzerland and the US. The average rate of unemployment among the seven largest economies is now 6.5 per cent.

When the Coalition was elect­ed last year, there was a general expectation consumer con­fidence would pick up and businesses would loosen the purse strings to invest in new ventures, thereby creating jobs.

But confidence has moved up and down since September. The budget has affected the public’s sense of optimism about the country’s economic prospects. With many of the measures now dead or stalled, it’s unclear how the budget is playing out in terms of consumer and investment spending.

Of course, the economy is much more than the budget. The continuing high dollar, the end of the mining-investment boom and the failure of the government to implement industrial relations reforms (even the ones for which it has a mandate) all have a bearing on the extent of job creation.

With several state governments under budgetary pressures, the number of new jobs in the public-sector space is likely to taper. Recent trends in graduate employment also point to a significant slowing in the labour market.

It now looks as though the budget forecast of a rate of unemployment of 6.25 per cent in June next year will be easily surpassed.

We are back to where we were in 2002, with little prospect of a rapid and substantial turnaround.

When it comes to the labour market, it would seem that we real­ly did waste the mining boom.