Promising economic signs suggest Australia is still the lucky country

Australia, it seems, is still the lucky country. This week’s surprisingly good jobs figure was a welcome sign that the economy is on the way back from its pandemic-induced coma of last year.

Last month, the top-line unemployment rate fell 0.2 percentage points to 5.6 per cent. When you factor in that the participation rate, which measures those working or actively seeking a job, hit a high, it is even more impressive. Nearly 13.1 million Australians are employed – also a record.

There are now a record number of Australians with a job after the unemployment rate fell.Credit:Nick Moir

So much for the argument that a higher JobSeeker payment would stop people going back to work. They are returning in droves.

However, while the big-picture numbers were encouraging, it was not all good news. The growth was driven by part-time jobs, which increased 91,500 during the month, while full-time work went backwards by more than 20,000. And Victoria’s figures were not so rosy: unemployment increased 0.4 percentage points to 6.1 per cent.

But the national trend is heading in the right direction. Combine this with the better than expected forecasts for the budget deficit, driven by the jobs surge and soaring iron ore prices, and you could be forgiven for thinking the worst of the economic crisis is behind us.

That’s not to say the road ahead does not have its share of speed bumps. House prices are once again rocketing, wages are growing at a snail’s pace, and pockets of the economy, including higher education, tourism and city-centre businesses, are struggling to recover.

Uncertainty in the higher education sector particularly – Victoria’s biggest export industry – is most concerning, and state and federal governments cannot agree on how to get international students back.

The end of JobKeeper, which wound up on March 28, will also be a drag on April’s job figures. How big this will be is hard to tell.

But most economists accept that after a slowdown, getting people back to work is often the hardest nut to crack. The promising trend should be kept on track by the enormous stimulus spending federal and state governments have rolled out, and which should continue to wash through the economy for most of the year.

There is little doubt that Australia’s ability to largely contain COVID-19, and the willingness of governments to loosen the purse strings have been the bedrock of the recovery. Any argument that times of economic crisis should be left to private enterprise and the markets to sort out has been debunked. Keynesian economics is here to stay.

The most discouraging aspect of this remarkable period has been the Morrison government’s failure to use the crisis to push through broader structural reforms. Its one big effort – bringing unions and the business community together to thrash out possible changes to industrial relations – has largely fizzled out. The Coalition appears not to have many other ideas on the table, and with a federal election to be held within the next 12 months, the window of opportunity has probably passed.

This will most likely lead Australia down a steady-as-it-goes economic path during the next year or two. With the vaccine rollout in Australia struggling to build momentum, that may prove wise. In the absence of widespread vaccination, the pandemic is still more than capable of knocking the economy off kilter.

The federal budget is now less than four weeks away, and the government finds itself in the enviable position of no longer having to make crisis-driven decisions. Treasurer Josh Frydenberg says it will include more spending on aged care, a series of measures on women’s economic security, and a big focus on skills and the workforce. He is also flagging no budget cuts to reduce the deficit.

After a year in which the economy hit the wall, the rapid recovery is welcome. We’re not out of the woods yet, but federal and state governments have proved themselves capable, so far, of finding a path through them.

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