There was a time when politicians could get away with celebrating ‘growth’ in the economy without regard to how many jobs it produced. Not any more.
When the Bureau of Statistics releases the gross domestic product (GDP) figures for the March quarter on Wednesday, market economists predict growth of 0.2 to 0.4 per cent, or around 1.6 per cent over the past 12 months.
That kind of growth – weak as it is – used to be taken to be an end in itself during the three decades when neo-liberal economic thinking dominated global affairs.
In the post-GFC world, however, the debate is increasingly turning to what those numbers mean for everyday households. And at the kitchen table, the news keeps getting worse.
As The New Daily has been charting for some time, growth in ‘hours worked’ is not keeping pace with the population growth.
Hours worked have fallen 6 per cent in per capita terms since the onset of the financial crisis, and the quarterly average is at the same level as in late 2002 when the economy was just starting to recover from the 2001 dot-com crash.
Wages, too, are flat with ABS figures released on Monday showing an increase of only 0.9 per cent over the year – well behind inflation of 2.1 per cent.
As if that wasn’t enough, GDP growth is still flowing from sectors where jobs are not being created.
Top of the list is the mining sector, which was a huge job creator until mining boom construction peaked in late 2013.
Now, falling demand for labour has reduced wages and salaries in the sector by 1.8 per cent in the past year – while profits rise.
Iron ore, for instance, has been through a mini price boom, moving from $US41 a tonne at the end of 2015, back to nearly $US90 a tonne in February this year, and then back down to around $US70 a tonne today.
That will feed into the GDP figures, but that growth is being almost entirely gobbled up as company profits.
That will produce more tax revenue to help the federal government balance its books, but the same government is struggling with welfare and family tax benefit payments which rise as the labour market sags.
The other giant propping up GDP has been the banking sector, where the huge run-up in mortgage lending since 2010 has created some jobs, but has pumped up GDP growth by much more.
When the ABS calculates the ‘value’ added by the banks, things get tricky – value can be created or destroyed depending where each good or service is placed on the accounting spectrum.
Economist Saul Eslake tells me that a homeowner with a mortgage is, in the ABS accounting rules, effectively renting their home from themselves. Those ‘imputed rents’ boost GDP.
Likewise, the interest payments they make to the bank each month are sliced into two components: part is pure ‘interest’, which isn’t counted, and part is a service from the bank, which is.
When these, and many more complex calculations are done, the sheer scale of the housing finance industry makes it a huge part of GDP.
As house prices have soared, so too has its contribution – though not the number of people the sector employs.
Jobs for tomorrow
When you put GDP growth together with the ‘hours worked’ data, Australia is in an era of both ‘positive growth’ and ‘jobs recession’.
This is what the neo-liberal thinkers behind the Abbott government failed to grasp.
That government did not value the auto-manufacturing industry, and its tens of thousands of jobs, because it was subsidised (all auto sectors around the world are) and not making the same contribution to GDP as mining and banking.
The folly of that attitude becomes clearer by the day.
The economy is leaning heavily on a temporary price rise in commodities, and the ‘growth’ generated by a housing bubble.
Meanwhile, the lower Aussie dollar is opening up opportunities for growth in agribusiness, food processing, advanced manufacturing and other sectors that suffered through the mining boom and housing bubble years.
Federal governments are now going to have to do a lot more to co-invest, or yes, subsidise growth stories in these sectors – and that’s merely a political observation, because growth without jobs really can’t go on.