Budget 2011: It’s all about the jobs, jobs, jobs
There’s a certain irony that a Government proud of an unemployment rate with a “four in front of it’’ is obsessed with work in this Budget.
“If you ask me what it’s about, it’s really about jobs, job, jobs,’’ Mr Swan told The Punch this week.
Such sentiments would have been unremarkable from treasurers past as they wrestled with deep recessions and accompanying jobless numbers in the double figures.
That however, is not where Australia is in 2011.
Indeed, with some notable exceptions - older workers, regional jobseekers - relatively few people actively looking for a job are being denied and employers are struggling to fill vacancies.
But for Wayne Swan this is a hinge Budget. He views it as a ``unique opportunity’’ on the cusp of a boom to marry long-overdue welfare reform and economic growth.
Unemployment sits at just 4.9 per cent and slated to drop to 4.5 per cent in the next two years as 500,000 new jobs are added to the labour force.
Below 5.0 per cent has long been regarded as approaching full employment functionally speaking but now some economists say the jobless rate will go even lower over the next 12 to 24 months - perhaps down to 4.0 per cent.
Added to that positive story is respectable economic growth with excellent medium term prospects, low levels of public sector debt compared to similar economies, a very strong dollar making many goods cheaper and thus tempering inflation, and lower interest rates than historically have been tolerable - at 4.75 per cent, the cash rate is a full 300 basis points below its level through most of 2008 for example.
Australia is in the fortunate position having precisely the commodities required by a rapidly industrialising world.
“The rivers of gold are in full flood,’’ says Deloitte / Access Economics’ director, Chris Richardson.
Thanks to China and India, our terms of trade are vastly better than at any time in the last 50 years and our national income is therefore climbing fast, a key driver of our bullish jobs market.
“The last time the world was paying Australia this handsomely for our exports, Bismarck was still trying to unify Germany into one country and Japan had only just opened itself to trading with the world after centuries of isolation,’’ he said.
``Those aren’t once in a life-time factors, they’re probably not even once in a century factors, and they are downright beautiful as a backdrop for the federal Budget.’‘
Yet for all that, gloom abounds and a monster deficit looms.
First to the gloom.
NATSEM economic modelling conducted for News Limited newspapers this week sparked a storm of indignation when it concluded that households, from poor to wealthy, were better off now than five years ago.
The findings were rigorous and completely independent and NATSEM, a highly regarded outfit used by Treasury, stands by them.
It crunched all the numbers contributing to household costs against income movements, welfare payments, and tax cuts.
Yet the response of readers via News Ltd websites was overwhelmingly hostile with many branding it a lie and the bidding of CEOs and the government.
People simply refuse to accept that a steadily rising tide of welfare over the last decade, tax cuts every year for the last 8 years, and pay rises, along with a number of necessities and discretionary items becoming cheaper, have freed up some cash.
Such is the ingrained culture of complaint that the feeling of an ever tightening cost of living squeeze, is unchallengable - even with empirical facts.
And politicians themselves are to blame because they never test the assertion that life is getting harder lest they be tagged as out of touch.
It is this very cowardice incidentally that led to the “rising tide’’ of middle class welfare in the first place and which dictates that no mainstream politician can ever admit it is enough - let alone, too much.
In a polity where everyone is trying to “empathise’’ with the battlers, and show they “feel your pain,’’ no one can call an end to this miserable game. And it is miserable because everyone says so.
The result has been corrosive to politics, to the economy, to public policy, and to public confidence.
Back to the Budget.
When Mr Swan rises to the Dispatch Box at 7pm on Tuesday, he is expected to unveil an underlying cash balance in the ballpark of $51 billion (negative) followed by another solid shortfall next year of $22 billion - both are about $10 billion over the most recent Treasury forecasts of $41 billion and $12 billion deficits respectively.
These blow-outs are contributing to the muddled story of this Budget, this economy, and the difficult politics surrounding both.
That confusion comes from a Commonwealth balance sheet still labouring from the revenue slumps of the GFC (company taxes and capital gains dried up) and with more recent ones still to register (floods, cyclone, earthquake/tsunami).
Yet co-incident with this impact on the Budget, the economy, although lagging with low consumer confidence and business lending, is nudging against capacity in some areas as Resources Boom MkII gathers pace.
Mr Swan must reconcile a short-term need for spending restraint to contain those deficits, with an impending avalanche of activity that will almost certainly lead to wages pressure and interest rate rises - and slingshot the Budget back into the black within two years to boot.
Here then is both the political and the economic imperative behind this Budget’s jobs focus: that an economy with strong employment already must somehow unearth hundreds of thousands of new workers or else face such fierce competition for scarce labour that it drives up inflation.
The Government’s response is a no-brainer: to meld the economic and the social - to make welfare to work, both morally right and economically necessary.
“It’s really important that we give every Australian the opportunity to participate and spread the benefits of wealth, and we don’t have a person to waste, we got unemployment coming down to 4.5 but still in parts of the country, there are high rates of unemployment and high rates of welfare dependency so a very big challenge in this Budget is to make sure we maximise participation from all Australians, in the benefits of the boom,’’ Mr Swan said.
The message to people on Newstart Allowance or the nearly 800,000 recipients of the more generous Disability Support Pension, is “your country needs you”.
Mutual obligation is the new black. If you can work, even in a limited capacity, you will be expected to do so.
But if this seems more stick than carrot, Mr Swan is eager to put it into a social justice framework.
“We’re dealing with the issues of intergenerational welfare dependency dealing with the issues of people on payments for long periods of time, some of whom have capacity to work, getting them into work is a key aim of the Budget’‘.
“We have a unique opportunity, given that unemployment is so low and given that we’ve got such a strong investment pipeline coming to do more and it just shouldn’t be confined to those people who’ve got the high degree of skills and will derive all the benefit.’’
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