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Wednesday, 18 September 1996
Page: 4679

Mr STEPHEN SMITH(5.06 p.m.) —I am very pleased to take part in the appropriations and speak on the budget. I support the amendment moved by the member for Holt (Mr Gareth Evans). This is Jobless Johnny's first budget and it is a very disappointing budget. There is no growth, no jobs and no job certainty. When one discusses the appropriation bill it is always important and relevant to look at some of the macro-economic framework that the budget is placed in. When you look at the macro-economic framework you see that things are not looking good so far as growth in the economy is concerned, so far as jobs and job certainty and security are concerned and so far as unemployment, particularly long-term unemployment, is concerned.

I will not actually start with the budget paper. I will start with a very important part of members' reading in this place and that is the 1996 annual report of the Reserve Bank which the former Governor of the Reserve Bank, Mr Fraser, signed off on 6 August. It is a nice prelude to the budget on 20 August and at page 11 the board refers to the labour market and says as follows:

Employment growth was broadly in line with the path of economic activity but the within-year movements were quite variable and their interpretation was complicated by uncertainties relating to the data. Over the year, employment rose by 1.0 per cent compared with 4¾ per cent during the previous year. The slowing was evident among both part-time and full-time workers but was more pronounced among full-time workers. Despite the slower growth in l995-96, employment has increased by around 10 per cent or over 750,000 since the trough of the recession in mid 1991. Over the past 18 months the slowing in employment has been more pronounced than the slowing in economic growth.

So the scene for the budget on 20 August as signed off by the Governor of the Reserve Bank is a slowing in employment and a slowing in economic growth.

When you move on in the board's report to pages 12 and 13, the board has this to say:

The unemployment rate was largely unchanged over the year at around 8½ per cent. Long-term unemployment continued to fall in 1995-96 with the unemployment for those out of work for more than a year falling to 2¼ per cent of the total labour force. This is still higher than for much of the 1980s but well down on the peak of the above 4 per cent recorded in mid 1993. The concentration of unemployment among certain groups in the community suggests that, while lasting reductions in unemployment require sustained growth and economic activity, combined with restraints in labour costs, there is also a role for training and other programs targeted at groups figuring prominently among the unemployed.

What is the board saying here? The board is handcuffing itself, as the previous government did with the Working Nation white paper, to the notion of the need for economic growth to create employment and the need for programs aimed directly at unemployed, particularly long-term unemployed. I repeat what the board had to say, `. . . there is also a role for training and other programs targeted at groups figuring prominently among the unemployed'. That is why it is so distressing to see a budget which has no economic growth, therefore no prospects for employment growth, no prospects for reduction in long-term unemployment and, at the same time, a massive reduction in the expenditure outlaid for those programs which are aimed at trying to give the long-term unemployed, in particular, a chance at employment.

When you turn to the budget itself, some 14 days after the Governor of the Reserve Bank signed off the bank's 1996 report, if I refer the committee to Budget Paper No. 1, it is interesting to see how through the macro-economic forecasts and statements in Budget Paper No. 1, you get a very clear understanding of the notion of no jobs, no growth, higher unemployment and higher long-term unemployment. In some other matters I will refer to subsequently, I think that we will see that these forecasts are now a bit tenuous and in some respects are optimistic.

At table 6 at page 1-20 of Budget Paper No. 1 we find the forecasts for growth or real GDP. The forecast for 1996-97 is 3½ per cent; for 1997-98, 3¼ per cent; for 1998-99, 3½ per cent; and for 1999-2000, 3½ per cent. All are forecast below four per cent, which is that percentage of economic growth generally regarded as the percentage you need to make some inroads into unemployment. Anything less than four per cent is basically just picking up those newer entrants to the labour market. Page 2-3 states:

Economic growth is expected to continue at a firm and sustainable pace in 1996-97 with GDP forecast to rise by 3½ per cent.

There are two things here: again, confirmation that we are looking at modest proportions of economic growth, but also there is a bit of an illusion here—I frankly do not regard 3½ per cent of growth as firm and sustainable or, as it is referred to subsequently in the papers, as `a forecast for strong growth'. It is simply growth in the economy that is barely enough to take care of those newer entrants to the labour market.

Moving on, under the heading `Employment and Unemployment' at 2-15 of Budget Paper No. 1, we find the budget paper saying:

Despite continued fairly rapid growth in year average terms, employment growth eased significantly through the course of 1995-96, increasing by around one per cent in the year to the June quarter 1996 compared with 4.8 per cent in the previous year.

At page 2-20:

Australia's economic outlook is for another year of strong growth.

I do not regard 3½ per cent as strong growth. And the final comment in the macro-economic section of Budget Paper No. 1, again under `Employment and Unemployment':

With continued non-farm GDP growth and an expected deceleration in real wage growth, employment growth should accelerate through 1996-97. However, a slowing in employment growth in year average terms is likely given the weak outcomes in the second half of 1995-96. The current level of job vacancies and the expectations reported in business surveys, support a short-term outlook of modest employment growth. Increasing employment opportunities and higher real wages through the course of 1996-97, should encourage people to re-enter or enter the work force, resulting in modest rises in the participation rate. With the labour force expected to grow solidly through 1996-97, the unemployment rate is expected to decline only gradually to around 8¼ per cent in the June quarter 1997 compared with 8.6 per cent in the June quarter 1996.

On the budget paper's assessment, which I will argue is now in a sense an optimistic assessment as far as employment and unemployment is concerned, and a massively optimistic assessment so far as defining 3½ per cent growth as strong, the key element arising out of this budget is no jobs, no growth, no job certainty. Jobless Johnny has really set himself to his nickname with this particular budget.

But shortly after the budget we find in the Australian on Friday, 6 September the Minister for Employment, Education, Training and Youth Affairs, Senator Vanstone, saying:

Long-term jobless may rise with reforms. The federal government's radical redesign of labour market assistance might not reduce the number of long-term unemployed, Minister Vanstone conceded yesterday. Senator Vanstone said it was, `theoretically possible that long-term unemployment would rise.'

For `theoretically possible', read `absolutely sure and certain' because what have we seen since budget day? What we have seen since budget day is the unemployment figures for August 1996 going above and beyond any of the forecasts or expectations that we find in the budget so far as unemployment is concerned with the monthly rate for August 1996 at 8.8 per cent.

The Banker's Trust, in its commentary on the monthly unemployment figures for August had this to say:

Our quick conclusion is that the labour market is still just muddling along.

The member for Port Adelaide (Mr Sawford), I know, would be interested in this quote.

The unemployment rate for males rose from 8.5 per cent to 9.1 per cent, its highest level since last October. The female unemployment rate was steady at 8.4 per cent. Almost all of the rise in unemployment in the month was accounted for by males. Who'd be a bloke?

And they conclude their comment by saying:

The labour market is simply stagnating, getting neither better nor worse.

Again, I think that is optimistic, given what we have seen in the last couple of days in so far as a couple of surveys and forecasts are concerned.

There is one point I would like to focus on for a moment. That is the notion of the need for economic growth to create employment, but also the need for governments and society to take special steps or measures to do their best to give unemployed people—in particular, long-term unemployed people—the chance of getting back into employment. It is the notion picked up in the Reserve Bank's report which I have referred to, and it was the intellectual and policy basis of the previous government's Working Nation report.

The shorthand version of that policy approach is simply `growth plus'. In other words, you need economic growth, but you have got to take special steps or extra measures to make sure that the long-term unemployed in particular get a chance of employment. And what have we seen in this budget? On the one hand, no growth, no jobs, no job certainty. And on the other hand, a massive slashing of the programs and the funds devoted to those special measures or extra steps.

At the same time, if it was not enough for these very modest growth proportions or projections to be subscribed to by the government, in areas where we know we have had considerable success over the last decade in improving economic growth and jobs—namely, our export performance and Australian industry's performance—we also see, systematically through the budget papers, industry assistance, incentive or support programs and trade or export enhancement or incentive programs either abolished in breach of election promises or massively slashed.

If you are interested in building ships and exporting them, the bounty is gone. If you are interested in being a small or medium size company that exports, the EMDG scheme has been gutted effectively and a cap of $150 million put on it, cutting EMDG expenditure by $426 million over a four-year period in breach of an election commitment. That commitment was that funds to EMDG and Austrade would be cut by $58.3 million over a three-year period. And my reference is just to the EMDG scheme. When you look at what is occurring in Austrade you effectively have $90 million cut out of appropriations for this financial year.

It is in that context that we saw the release yesterday by the Australian Chamber of Commerce and Industry and Westpac Bank of their September quarterly survey of industrial trends in manufactures in Australia. In the course of the materials released by the ACCI and Westpac yesterday we find Bill Evans, the General Manager, Economics, for Westpac commenting:

Given that the budget was aimed at restoring business confidence and its associated forecast predicted a very healthy 14 per cent increase in business investments, the results of the survey, in showing that manufacturing activity continued to ease, will be disappointing for the government.

In other words, the 3½ per cent maximum growth which is in the budget papers is predicated on a 14 per cent increase in business investment. And, a short time after the budget, the ACCI and Westpac are saying that you will not necessarily get that private investment. So, in addition to all the other things that are going on that I have referred to, you are not necessarily going to get the private investment which is also required to meet the very modest growth projections that we see in the budget. Mr Evans continued:

Another worrying sign relates to employment. The March and June surveys reflected an economy where employment growth was negligible. Hopes for a stronger employment performance in the September quarter are not supported by this survey. Expectations for the December quarter offer little hope of any significant improvement in employment conditions.

In other words, don't expect any great increase in employment and, on the other hand, what will you also get? You will get an increase in unemployment.

In the highlights by the ACCI and Westpac, there is a specific reference to unemployment. It says:

Labour shedding continued in the September quarter with a net balance of minus 24 per cent versus minus 23 per cent previously. A further decline in numbers employed is expected in the December quarter with a net balance of minus 19 per cent. The decline in overtime work is expected to continue in the next three months

The survey shows, not an increase in employment, but a decrease in employment and a consequent increase in unemployment.

The summary of the survey of industrial trends released at the same time by the ACCI and Westpac says:

Manufacturing activity continued to ease with actual outcomes in the September quarter 1996 broadly similar to those reported in the previous three quarters. New orders, output, employment and overtime work all declined, in most instances marginally more quickly than in the previous quarter.

So, where is the trend line going? Down. Employment is going down. Orders are going down. Investment is going down. The trend line in unemployment is up. Jobless Johnny: no jobs, no growth and no support for the long-term unemployed—


Mr Somlyay —As a point of order, I would ask the honourable member to withdraw that and to refer to the members of the House by their titles.

Mr STEPHEN SMITH —The budget of the member for Bennelong (Mr Howard) will have the effect of increasing joblessness in Australia.


Mr STEPHEN SMITH —The survey goes on to say:

Capacity utilisation remained at low levels. Increases in new orders and output are again predicted for the next quarters with expectations for new orders strongest in the lead-up to Christmas.

And you can look at the tables that are attached to the survey, under the headings `Employment: Labour shedding continues unabated' and `Overtime declining'. And I will not take any further time on that particular survey.

Then you can look at the MTIA's budget assessment. The MTIA in its input special budget production has a very nice table which makes these points quite illustratively: `The outcomes and forecasts, main economic forecasts from the 1996-97 budget'. The MTIA, in its formal budget response, refers to risks and challenges, and makes the very obvious comment: `four per cent plus growth must be our goal'. But for the forecasts and the statistics which the MTIA regard as being significant:

GDP—outcome 1995-96 year average, 4.1; forecast 1996-96, 3.5—

growth is down.

Exports of goods and services—1995-96 year average, 4.3; forecast, 8

- exports are down.

Imports of goods and services—year average 1995-96, 5.6; forecast, 1996-96 year average, 11

imports are up.

Unemployment rate, 8.5 year average 1995-96; forecast, 8.5

last month, we saw 8.8 and all the evidence from the surveys that I have referred to are for that to increase. And we saw in the Australian today a summary of those reports under the heading `Jobless forecast fuels fears of economic slowdown'. The article stated:

Fresh evidence that unemployment could soon reach 9 per cent and the prospect of further job losses in manufacturing have fuelled fears of a budget induced economic slowdown.

That is obviously the case, given the measures contained in the budget. The article continues:

As the worst long-term jobless figures in seven months were released

yesterday. . .

The Australian Chamber of Commerce and Industry found manufacturers expected labour-shedding to continue. . .

Westpac's general manager, economics, Mr Bill Evans, said there was "a chance" that unemployment could hit 9 per cent by the end of the year. . .

The Australian Bureau of Statistics reported that the number of long-term unemployed . . . rose to 229,300 in August. It was the third monthly increase in a row and the highest figure since January. Senior Treasury officials played down hopes of a rapid improvement in employment from the Government's labour market reforms.

And, of course, the other thing that we are regaled with in the budget is the Budget Paper's waxing lyrical about all these problems which will be solved by the government's workplace reform bill. All you have got to do is force the wages down, give the workers low-paid jobs, and that will solve all the problems of the world. So I was very pleased to see that Professor Gregory was reported in the Financial Review today challenging this very simplistic notion that those on the other side always love to handcuff themselves to—namely, that we will solve all the problems of the world by just pushing down the workers' wages.

The Financial Review article, which is headlined `Gregory challenges Government push on labour flexibility', says:

. . . Professor Bob Gregory has issued a sweeping new challenge to Federal Government claims that greater labour market flexibility will significantly reduce unemployment in Australia.

Professor Gregory argues. . . that Government moves toward creating a more US-style labour market will reduce the wages of low-paid workers.

`The restoration of full employment will lie in a direction other than reducing the wages of the low paid,' he says.

The article continues:

Noting the Government's claim that its planned individual employment contracts will not worsen employment terms and conditions, Professor Gregory says: `Is it possible to reduce unemployment and produce jobs by creating greater labour market flexibility, but ensure that this flexibility does not extend to reducing wages and conditions?'

So Professor Gregory scotches the simplistic notion that coalition members have always trotted out in this place that all one has to do is crush the workers' wages and the problems of the world will be solved. (Time expired)