Mike Freelander (Macarthur, Australian Labor Party) Share this | Hansard source

Mr Deputy Speaker, I congratulate you on your appointment.

I speak on the budget appropriation bills, and this is a very good time for me to talk as this is the eighth anniversary of Wayne Swan's stimulus package, which prevented Australia from entering the global financial crisis. This is my first contribution to the work of the Federation Chamber and I am grateful for the chance to say a few words on these very important bills. In keeping with what I understand to be conventional practice, my remarks today are intended to encourage and persuade, rather than confront. If that means that, at times, I am a bit off message, I can only apologise to my colleagues in advance and say that I am sure it has something to do with the proximity of this chamber to the Senate and with the spirit of the late John Button, an icon to me and one of the Hawke government's sharpest ministers, but one that, even as government Senate leader, could not help publicly testing ideas that others occasionally wished he had stuck in the bottom drawer.

The labour force statistics for September 2016 are due out next Thursday, so now is as good a time as any in the context of these budget bills to have a look at how the Australian job market is travelling and see if we might do better than present trends suggest. I am old enough to remember the 1960s, when an unemployment rate above two per cent was nearly enough to get a well-entrenched federal government unelected. I am also old enough to recall that, more than once in the last 40 years, unemployment has been a major blight on our country. In some ways, and for many people, it still is. From experience, we know that when the unemployment rate climbs, it climbs steeply, and when unemployment falls, it does so slowly. It can take anything from five to 10 years to make up for the jobs and jobs growth lost in six to 12 months of downturn and recession. We can easily forget how a recession plays out. Many older workers are retrenched, never to find employment again. That is what we are seeing now. Those trying to enter the job market find it incredibly hard to gain a foothold or permanent employment. Savings soon disappear, and families and individual lives are destroyed.

That is why we should be grateful to those, such as Wayne Swan and the Labor Party, who piloted our economy through the global financial crisis and left us with a job market that was the envy of the OECD. That is also why we should be none too comfortable about living with an unemployment rate that has edged close to the wrong side of the OECD jobs ledger. Australia's unemployment rate has been pretty much stuck at around 5.5 per cent to 6.1 per cent since February 2013. According to Treasury's budget and pre-election forecasts and projections, that rate is likely to persist until 2019-2020. That is if everything goes reasonably well and economic growth continues uninterrupted at a solid but uninspiring rate of between 2.5 and three per cent. What that means is that, even if 25 years of uninterrupted economic growth stretches out to 28 or 29 years, we will still have close to a million Australians who want work in 2020 and cannot find it, and that is a tragedy. That is an unemployment rate three to four times higher than back in the era of fixed exchange rates, of centralised wage fixing, of higher tariffs and pre financial market deregulation.

It is not that we should return to a time when dinosaurs, John McEwen's Country Party and unabashed protectionists last roamed the earth. Far from it. Beggar-my-neighbour trade policies and protection all around might make for a simpler world, but it would be a far poorer world too. However, we are overdue for a frank re-evaluation of our economic thinking and priorities. As with many Western economies, 'business as usual' looks a poor option for ensuring a better and more secure life for all Australians. We need to identify policies which, at the very least, will better cushion Australian families, however defined, from the next economic shock when it comes.

An unemployment rate mired at around 5.5 per cent or higher comes at a significant social as well as economic cost and is bad for the budget bottom line. Unemployment strikes at the heart of social justice and social cohesion. Invariably it falls most heavily on the poor and the weak. It represents waste in every sense of the word—wasted opportunities, dashed hopes and, too often, lives scarred by chronic ill health and tragically cut short.

As a doctor working for over 30 years in Sydney's south-west, I saw almost every day the misfortune and misery that had its root cause in unemployment. So when I say that I think we need to be more honest with ourselves when pondering the failings or shortcomings of economic and employment policies, I am saying that we need to think beyond the headline monthly figures and challenge policymakers to, at the very least, keep their eye on the ball. We must also not pretend that the unemployment problem is either too hard or too elusive to solve. It might constitute a good start if government were not quite so self-congratulatory whenever the number of Australians in work rises. Yes, that is a good thing but, no, it is not necessarily cause for breaking out the champagne.

For unemployment rates to fall, the number of new jobs must at least match population and productivity growth. But history tells us that employment levels may rise even if unemployment is rising too. Jobs growth of a few per cent a year is situation normal; it is not situation spectacular. Let's also not be overly confident that, when national growth rates pick up, all boats will rise on the tide. They might, but it is not always the case that everyone finds a job when times improve. Good macro-economic policy and a strong economy will not magically return us all to full employment, even if it is the best way of getting us most of the way there, and monetary policy alone will not do the trick either.

I note the Treasurer's recent comments regarding the diminished effectiveness of monetary policy, which pretty much bring him and the government into line with what the Reserve Bank and many others have been saying for some time. It is pleasing to see him on board. The question that he has yet to answer, though—the really hard question for whoever holds the economic levers—is: if the limits of monetary policy are exhausted, what are our remaining options? And for those who might think that that is an argument for a dose of budgetary austerity, think again. Better still, just have a quick read of any of the statements and speeches made by Reserve Bank governors in recent times. There is no support whatsoever for another round of budget tightening or fiscal self-mutilation.

The first step to better labour market policy is to try to better understand what the headline rate of unemployment actually signifies. Is 5.5 per cent good, bad or indifferent? Stripped of its context, 5.5 per cent of anything is just a number.

I have already touched on the history, so now I will turn to how we have been doing against those economies we usually like to compare ourselves with. How well is our labour market positioned in comparison to those countries to withstand the next economic shock? Unfortunately, the answer is: not as well as we once were. Australia is now squarely in that block of advanced economies whose employment rate has either flatlined or deteriorated since the GFC. Immediately post 2009, Australia was ahead of the game. Now, though, most of the countries we like to compare ourselves to—the US and the UK in particular—have not just caught up, they have zoomed by.

Our relative position against the majority of OECD countries has deteriorated in the last three years, and that is despite our falling dollar and record low interest rates. The unemployment rate here has been barely treading water since 2013. At 5.6 per cent, Australia had the eighth lowest unemployment rate of the 34 OECD countries in 2009. Now, in 2015, at 6.1 per cent, it has only the 13th lowest unemployment rate. Australia is one of the 14 OECD countries that recorded a rise in their unemployment between 2009 and 2015—19 OECD countries recorded falls in unemployment. From 2009 till late 2015 the US unemployment rate fell from nine per cent to about five per cent and, in the UK, from 7.6 per cent to 4.9 per cent. I am not the only one to notice this—many economic commentators have already noticed it.

The picture is no rosier if you drill down to the headline rates of unemployment and look at Australia's performance in four critical measures—underemployment, long-term employment, youth unemployment and labour force participation, and employment and training to population ratios. Youth unemployment currently stands at around 13 per cent, which is shocking. Similarly, for the 20- to 24-year-old cohort, the proportion in work or training has continued to decline since 2008. Our long-term unemployment figures are also terrible. By July 2016 about 22 per cent of those unemployed were classified as long-term jobless. These are very depressing figures, because those remaining out of work for periods of 12 months or more have a very high propensity to suffer scarring and psychological and physiological damage. They are also subject to statistical discrimination from potential employers—for example, they cannot get a job not because they are unemployable but because they are unemployed.

In underemployment we are also doing badly. Both labour underutilisation and underemployment rates are two to 2½ points higher now than they were in 2012. A higher proportion of the workforce wants more hours than employers can give them. The proportion of persons in paid employment has also deteriorated and is now lower than before the GFC and lower than three years ago. It is also much harder to find a job. Recently published National Institute of Labour Studies research shows that the transition from university to full-time employment is becoming more perilous. Between 2008 and 2014 the proportion of new university graduates in full-time employment six months after course completion had fallen from 89 per cent, which was reasonable, to now only 67 per cent. At the other end of the market, the prospects were even worse, with those who do not complete secondary education having far higher rates of unemployment.

This seems to be part of a wider picture and raises the prospect of a growing mismatch between job vacancies and persons with the right skill sets to fill them. In my own electorate of Macarthur the position is pretty much on a par with national trends, although our youth unemployment is a little higher. I see some aspects of this seemingly intransigent problem most days that I work in my practice, and it seems a lot, lot worse to me than any numbers can tell. I see people I have looked after since they were babies now as young adults being unable to find meaningful work, sometimes for years. That causes long-term social harm.

As I suggested in my opening remarks, I am not here to apportion blame. I am not trying to be uppity and pretend that I know it all or that I am an economist. What I want the government to do is have a fresh look at the jobs market and then ask itself whether it is sensible to simply continue along with its present policies. By that I do not mean embark on another campaign demonising the unemployed or trying to reintroduce Work Choices-type arrangements or harsher work tests via the back door. Australia does not have a problem with a lazy or ill-educated labour force, excessive wages growth or even a lack of workplace flexibility. You only need to look at the amount of unpaid overtime being worked to refute any of those myths.

To conclude, the core fact remains: on any number of labour market indicators we are not doing as well as we might. We could do a lot better. We are also doing a lot less well than we once were. We are performing poorly in comparison with many other OECD countries. On measures such as labour utilisation, youth unemployment, long-term unemployment, ease of transition from education to work and income growth we are highly exposed if the world economy stalls or domestic growth rates falter. It is all contributing, via lower economic activity and higher welfare payments, to a bigger budget deficit.

However, to end on something of a bipartisan note, one thing worth recalling is that change is possible and there is often plenty of credit to go around. Federal Treasurers from Keating and Costello to Swan—we could each anoint our own personal favourite—all improved the level of economic discourse in Australia. They took people with them or they tried to. They explained. Principally under Paul's Keating stewardship even the quality and readability of the budget papers improved. We went, as he called it, to a Rolls-Royce standard. Even busy doctors like me became semi-economic literates. It helped, too, that more and more Australians had a background in business, finance or economics, and that we had a crop of first-class popular—but not populist—economic commentators like Alan Kohler and that national treasure, Ross Gittins. Most significantly, the people stuck with it too. And that is in no small measure because there was always a sense that the policymakers stayed true to the one principle. That principle was that, ultimately, jobs and the protection of people's welfare were what mattered most. Increased flexibility and economic reform, under Labor in particular, was about ensuring that there was always enough work to go around, even if the nature or the type of work changed very much over time. Neville Wran's famous words at the Hawke government's National Economic Summit still resonate with me: 'Economic policy is fundamentally about three things—jobs, jobs and jobs.' No government or opposition should forget that, and I am trusting—although some may think there has been the odd memory lapse or policy misfire along the way—that no-one has forgotten that.

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