The drop in the unemployment rate from 7.5 per cent to 6.8 per cent in August and a surge in job creation left many economists scratching their heads. The outcome is good news for the Australian economy – but to say there is a lot of noise in these figures is an understatement.
As we do our best to get a steer on how our economy is traveling, one key measure to keep an eye on is hours worked, which is what will drive a recovery in household incomes and boost growth through increased household spending. In August, hours worked increased a modest 0.1 per cent. This reflected a mixed picture across the country, with a big drop in hours worked in Victoria, while all other states and territories saw positive results. Total hours worked, however, are still more than five per cent lower than in March when lockdowns were first imposed, so we have some way to go yet.
The below chart from CEDA Chief Economist, Jarrod Ball, created from ABS data compares hours worked during the recessions of the 1980s and 1990s with the COVID-19 recession. It suggests the recovery will likely be long and bumpy, taking years to get back to where we were at the start of this year.
These figures really highlight that the Federal Budget, now just two weeks away, must drive renewed momentum in the economy to create more jobs as quickly as possible. This is where spending should be targeted. It’s worth highlighting a recent labour market paper
published by CEDA from Sydney University Associate Professor Elizabeth Hill, which looks at OECD research showing a one per cent GDP investment in care industries provides a near five times greater boost to direct employment than the same investment in construction. This is worth keeping in mind, with reports today suggesting infrastructure spending will be a key plank of the budget.
While getting the most bang for our buck through job creation and dollars spent in the economy is the immediate priority – and a permanent lift in unemployment benefits remains a priority on the latter front – we must also remember the debt governments are now accumulating will be paid down for years to come. Why not use this moment to boost our growth potential through policies that will give business the confidence to make long-term investment decisions? On this front, reports that a business investment allowance is on the cards are welcome. CEDA advocated for such an allowance in our Sustainable budgets
report in March last year.
As helpful as measures such as this will be, they must be backed by policies that foster confidence in our economic future. To this end, we call on the Government to outline a clear long-term growth agenda that excites business and the broader community. That is how we will really reignite the economy.
In CEDA news, Cassandra Winzar joins us today as our Senior Economist based in Western Australia. Cassandra has most recently been with the WA Department of Communities Housing Authority as Principal Economist and has previously worked for the Reserve Bank of Australia and EY. The WA insights and expertise Cassandra will bring to our team are a positive step towards our aim to better leverage state insights and perspectives into critical national policy conversations.
This week, we take a look at Agribusiness' place in Australia's economic recovery
, in a livestream event on Thursday 24 September. Speakers include National Farmers' Federation Chief Executive, Tony Mahar and CSIRO Futures Lead Economist, Dr Katherine Wynn. It will be facilitated by Allens Partner, Franki Ganter. Register here
Next week, the Tasmanian State of the State
event will see Premier the Hon. Peter Gutwein provide a crucial update on the economic outlook for the state. This livestream be held on Wednesday 30 September. Register here
In our latest podcast, I catch up with US-based public policy think tank New America’s Senior Advisor for Public Interest Technology, Vivian Graubard. We discuss how technology can be used to create simple but practical solutions in the public interest, how to address systematic inequality through technology and the difficult process of earning the trust of users. Listen here
This week on the blog, Asialink Business Chief Executive, Mukund Narayanamurti considers how the pandemic has affected Australian trade in Asia, and argues that with the right approach, Australian business can continue to thrive in the region. Read it here
Also on the blog, CSIRO Futures Lead Economist, Dr Katherine Wynn discusses how investment and innovation in Australian agribusiness could drive billions of dollars in economic growth. Read more here
Leadership team profiles
Following last week’s profile of our Director, People and Culture Belinda Gleeson, this week you can read the profile of our Chief Operations Officer, Sharon Smyth
We are happy to be welcoming another new state member to the CEDA community this week. And thank you to all our renewing members.
New state member
US Consulate General Melbourne (VIC)
Business Council of Co-operatives and Mutuals (NSW)
Chevron Australia (WA)
HBF Health (WA)
Southern Sydney Regional Organisation of Councils (NSW)
Things are looking better for those of us based in Victoria, which is welcome to say the least. Keep up the good work everyone wherever you are, and as always, stay safe.