Editorial Issue No 81: The Scandal of Unemployment
The Federal Budget and the scandal of unemployment
All budgets are essentially fictions as they are based upon projections about an unknowable future: annual rates of GDP growth, levels of taxation revenue, iron ore prices etc. Yet the budgets delivered by this government are beginning to feel more like an episode of Game of Thrones than a credible economic exercise, so divorced are their stated justifications and underlying assumptions from reality.
The 2015 budget, is a case in point. In his budget address, Treasurer Joe Hockey claimed the budget was part of ‘the government's plan to strengthen our nation's economy...and, 'Through careful planning we are successfully navigating the difficult transition from a mining investment boom, to one of broader based growth across our economy.’ There was little substance to this claim.
Small business owners benefited from tax cuts and other tax-concessions, and the government tried to justify this as a job-creation plan. This is highly improbable. Although generous, it is unlikely that the budget’s fiscal stimulus for small business owners will be of a sufficient magnitude to allow many of the sole traders, who comprise 60 percent of small business, to take on an employee. The same is true for those in the next largest category, comprising 24 percent of small businesses, which employ between one and four workers.
Certainly, these measures could have a moderate stimulatory impact on the economy more generally - particularly through the multiplied effects of increased small business spending. Nonetheless, such measures should be seen for what they are: thinly disguised pork-barrelling targeted primarily at sole traders in those electorates which the coalition is desperate to hold in the next election.
Indeed, apart from the hope that a new series of free trade agreements with China, Japan and Korea will generate new employment in Australia, there is little by way of job creation strategies in the budget. This should be particularly worrying given that mining investment is forecast to fall, contributing to a net decline in private sector investment more generally.
Underscoring this point is that even the Government’s own very generous budget assumptions about future GDP growth would still see official unemployment remain at about 6 percent, or three quarters of a million people. This figure is likely to underestimate the total number of unemployed, and hides significant problem of under-employment. Indeed, Roy Morgan Research estimates the combined figures of unemployment and under-employment to stand currently at close to 20 per cent of the Australian workforce.
It is a human tragedy on a massive scale. Unfortunately, this government is following in the well-worn footsteps of its predecessors for at least the last two decades in not having anything approaching a large scale job creation strategy or industry policy.
But this is not simply an 'austerity budget'. In 2014, the government shouted about a ‘budget emergency’ and the need to slim the size of government. Yet, notwithstanding Hockey’s claim 'to continue repairing the budget with sensible savings and a prudent approach to spending’, the 2015-2016 budget anticipates government expenditure of 25.9 per cent of GDP, making this government one of Australia’s biggest spending of the last four decades. Moreover, deficits are forecast to persist well into the future. And all of this while neglecting much needed increased investment in public education, public health and affordable housing, but continuing to fund the subsidization of privilege