Malcolm Turnbull, Scott Morrison falter on ‘jobs and growth’

It’s hardly surprising that Malcolm Turnbull and Scott Morrison don’t mention the jobs and growth mantra quite as often these days. Let’s face it, we were all about to utter a very loud collective scream if we heard it once more during the election campaign.

And let’s not forget that this is the mantra of the bloke who had to get rid of the other bloke ­because “we need advocacy, not slogans”. So, what is jobs and growth? A comprehensive description of the complex economic challenges we face?

This week’s gross domestic product figures came as another jolt for the Prime Minister and his inexperienced Treasurer: a ­fall of 0.5 per cent in GDP is difficult to square with the growth bit. And, by the way, there are a few wonky aspects of the jobs bit as well. No doubt this is how the Treasury’s memo to the Treasurer read:

 • These are preliminary figures and are subject to revision.

 • There are a number of one-off factors.

 • The figures are backward looking.

 • We expect the next quarter GDP growth figures to be positive.

 • There are, however, some grounds for concern, including the possibility that the budget forecast of 2.5 per cent growth for this ­financial year will not be achieved.

 • Private investment remains very weak.

While there was a broad consensus that the September quarter national accounts would show weak GDP (zero growth or perhaps a small negative were the most common forecasts), a fall of 0.5 per cent was unexpected.

If we dig beneath the surface, we find that net exports (exports minus imports) surprisingly ­detracted from GDP growth. This is likely to be reversed in coming months.

The fact that public investment also detracted from GDP growth in the September quarter was principally the result of a jump in public investment in the previous quarter.

But the two key concerns for the government are the ongoing decline in the private investment share of GDP (since 2012) and the more recent fall in investment in housing and construction.

While housing had picked up the slack arising from the end of the mining investment boom, this contribution to economic growth is now running out of steam and it is not clear what will replace it.

The latest GDP figures also underscore the unevenness of the economy across the country.

The West Australian economy is now in deep recession, with the fall in state final demand greater in the September quarter than in the previous one. But the latest figures also show weakness in terms of their economies even in the states that had been powering on, such as NSW and Victoria.

State final demand in Western Australia fell by a whopping 9.5 per cent over the year ending in September. Victoria, meanwhile, recorded the relative anaemic figure of 2.5 per cent.

To be sure, there are some brighter parts in the national ­accounts if you hunt around. Nominal GDP looks as though it may be picking up and compensation per employee grew 0.8 per cent in the September quarter. Real net disposable income per capita also rose 0.5 per cent and the terms of trade jumped an impressive 4.5 per cent in the ­quarter.

Turnbull and Morrison are no doubt hoping for a rebound in the December quarter so that the dreaded word “recession” cannot be legitimately bandied about and make opposition Treasury spokesman Chris Bowen’s day, week and month.

And without strong growth in the last quarter of the year, there is no way the revenue projections contained in the budget can be fulfilled.

So that’s the growth bit of the mantra: the economy continues to grow below trend and the weakness of private investment, notwithstanding record low interest rates, remains the principal explanation.

There is no evidence the Turnbull government has made a jot of difference when it comes to lifting the rate of economic growth.

Now, what about the jobs bit? While the unemployment figure of 5.6 per cent gives an impression of a reasonably strong labour market, in fact over the past year conditions in the labour market have been sluggish.

Consider the number of ­employed persons. Over the year ending in October, employment increased only 0.9 per cent, which is half the long-term average growth rate. The employment-to-population ratio fell 0.3 percentage points to just under 61 per cent.

What is also very apparent is that a marked shift to part-time employment is taking place. Since December 2015, full-time employment has shrunk 70,000, while part-time employment has risen 133,000.

Associated with this shift to part-time employment is the very noticeable rise in the numbers of underemployed people — those who would like more hours of work each week.

Additionally, there appears to have been a structural break ­between movements in unemployment and underemployment.

Traditionally, there were close-to-synchronous cycles of unemployment and underemployment. When unemployment went up, underemployment went up and vice-versa.

At the beginning of 2014, however, the direction of movements in unemployment and underemployment began to diverge. There was a noticeable upward shift in the proportion of people who felt they were not fully occupied even though the rate of unemployment was falling.

It’s not entirely clear what is responsible for these divergent movements between unemployment and underemployment. It has something to do with the increasing importance of the service industry in the labour market.

Given the imbalance of applicants and jobs, there is increasing scope for employers to restrict the hours of work on offer to coincide with peaks in demand. This is a good way for businesses to contain costs but means that the workers are often given fewer hours of work than they would prefer.

So here’s my tip to the government: forget the jobs and growth slogan. The jobs outlook is not very rosy — ask some of the graduates who are finding it difficult to secure suitable work — and the economy is in a funk, hopefully temporary.

In fact, the Prime Minister should follow his own advice, given at the time he deposed Tony Abbott.

He declared back then that we needed “a style of leadership that respects the people’s intelligence, that explains these complex issues and then sets out the course of action we believe we should take and makes a case for it”. That would make a change.