Monday, 22 June 2009

Welcome to the latest edition of my economic note. As regular readers of this note would no doubt be aware, we've received quite a bit of data of late showing that the Government's economic stimulus is working to stimulate the economy and support jobs. And while it's always encouraging as Treasurer to read positive data from the Australian Bureau of Statistics, it's even more satisfying to go to the local shops and see the car parks full and the shop assistants busy, and to talk to people who have just bought their first home after years of renting. It certainly doesn't make me complacent about the significant jobs challenge in front of us, but I definitely take heart from the fact that Australians are pulling together and doing what they can to build confidence in the face of the global recession.

Economic Stimulus

The graph below shows the impact the Government's substantial economic stimulus is expected to have on the Australian economy. It compares the falls in output in Australia during previous recessions and the current downturn based on Treasury's forecasts after taking into account the Government's stimulus, and their estimate of the path of activity without our economic stimulus.

This graph clearly shows that were it not for the Government's economic stimulus, the global recession would have pulled the Australian economy into a downturn more severe than the recessions of the 1980s and the 1990s. However, as a result of our stimulus measures, the downturn in Australia is expected to be milder than both of these past recessions.

Level of GDP

Supporting Jobs

While the above graph shows the difference that stimulus makes in economic terms, it doesn't convey the human benefits of stimulating the economy. In this regard, Treasury estimates our economic stimulus will support up to 210,000 more jobs over the period ahead. That's 210,000 breadwinners who would otherwise be without work, were it not for Government action.

In my speech to CEDA's 'State of the Nation' conference last week, I made the point that people often fail to consider the human and financial costs of unemployment. Treasury estimates our economic stimulus could mean that total employee incomes over the next decade will be around $100 billion higher, and these higher incomes will translate into additional personal income tax of around $23 billion over the decade. Our stimulus measures could also mean that the number of long-term unemployed will average around 80,000 lower, and expenditure on unemployment benefits will be nearly $4 billion lower over four years.

Jobs Data

Last week we received some encouraging figures showing our stimulus is helping to support retail and construction jobs with the release of industry employment figures for the three months to May. These figures give us this week's Fact of the Week, which is that there are now 15,250 more Australians employed in the retail sector than in November last year. This is a good result in tough circumstances, for a sector that employs so many Australians, and is clear evidence that our cash stimulus payments are working to help keep more Australians in jobs.

The increase in retail employment in Australia contrasts with significant falls in retail employment elsewhere in the world. Since November last year, the US has lost 308,000 retail jobs, Canada has lost 37,000 retail jobs, the UK has lost 32,000 retail jobs, and NZ has lost 31,000 retail jobs.

The industry employment figures also showed that an additional 10,000 construction jobs have been added in the three months from February this year. Again this comes at a time when construction activity and construction jobs have been in decline around the world, with the US shedding around 290,000 construction jobs over the same period, and Canada shedding almost 30,000 construction jobs.

Coming Up

In the week ahead, we will receive the OECD's Economic Outlook and Australia's financial accounts for the March quarter.

While we've had some positive news this week on the retail and construction jobs front, by no means are we out of the woods. We face a really tough road ahead, particularly in terms of jobs, which is why it's so important that the majority of the Government's economic stimulus is still to flow through the economy. The shovel-ready projects and large-scale infrastructure that make up phase two and phase three of our stimulus will see 35,000 building sites spring up around the economy. And we won't let anything distract us from our fundamental task of supporting jobs by investing in nation building infrastructure.

Wayne Swan
Treasurer of Australia