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Unemployment expected to accelerate -

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Unemployment expected to accelerate

The World Today - Thursday, 11 December , 2008 12:10:00

ELEANOR HALL: But we begin today with the latest grim news on Australian jobs.

The official figures released late this morning show that the unemployment rate rose by 0.1 of a
per cent to 4.4 per cent in November with the number of Australians with jobs falling last month by
more than 15,000.

While economists had anticipated the rise in unemployment, businesses are now preparing for a
protracted slowdown and the jobless rate is expected to accelerate in the New Year.

Richard Lindell has been looking at the numbers and he joins us now.

So Richard, how worrying are today's numbers?

RICHARD LINDELL: Well if we pull down instant numbers we can see that full-time work actually
increased by 8,800; part-time work fell by almost 25,000. As we have talked about a number of times
a sample is not that accurate, but it could mean that employers are shedding part-time workers
first - which makes sense, which is what historically has happened.

But I doubt we'll see full-time employment rising over coming months. I think over coming months we
will see both trending downwards.

If we look at this year, we can see that the unemployment rate has rising from 3.9 per cent in
February to 4.4 per cent today and it is really not surprising when you look at some of the big job
losses we have seen.

Thirty-eight thousand jobs have gone in manufacturing this year alone. Babcock & Brown has cut 850;
ANZ 500; Fairfax 550; Macquarie; Citigroup; Westpac; St George, they are all cutting jobs.

In the airlines Qantas and Virgin Blue are prepared to cut jobs in the coming year if they need to
and today the really bad news is that Rio Tinto is cutting 14,000 jobs worldwide, worldwide. Many
of those are going to be in Australia.

And that is really bad news because the mining sector has been the one bright spot and up until now
it has been the driver of the Australian economy; so that doesn't bode well for the future.

ELEANOR HALL: And today's figures don't take into account the ABC Learning closures or the Rio
cuts. How much worse will it get next year?

RICHARD LINDELL: Look historically if we look back to the last recession unemployment peaked in
December 1992 at 12 per cent.

No-one is predicting that it will be that bad this time but there is a range of forecasts from
economists from 6.5 per cent at end of next year to 7, 8, 9 per cent by 2010.

And that's based on expectations that job shedding will accelerate after Christmas and into the New
Year. We have already had retailers like Harvey Norman warn that there will be some store closures
and if they are closing stores, you can bet there will be a lot of other stores closing.
Restaurants will be cutting back. Services will be cutting back and if we look at all the forward
indications, they are all bad.

Job ads were down nine per cent last month after many months of falls before that. Forward orders
are down so that means less production, that means less jobs and all the business surveys are
saying that next year is looking particularly weak.

ELEANOR HALL: Will the recent series of interest rates cuts and the Government's stimulus packages
do anything to help people stay in jobs?

RICHARD LINDELL: Well, the RBA has cut interest rates by three per cent in four months but will
probably have to do more; which should stimulate demand in retail and the services sector. It
should also start to stimulate construction in the housing sector.

The Government will also need to do more. It is punting $10-billion as we all know, this month,
into the economy but it will also to start fast-tracking some infrastructure projects which can
employ large amounts of people and provide ports, roads, rail and other vital infrastructure for
when the economy does pick up again.

But working against that is the fact that many people close to retirement have had their super
slashed in half by share market falls. Many of those will now have to stay in the workforce longer
and that will add to the unemployment rate. Many small and marginal businesses will fail. Many big
businesses will continue to trim its workforce, as well.

So, the Government and the RBA are already doing as much as they can and will continue to do more
in the New Year; but it may not be enough or it may not have enough firepower really to counteract
the fact that the US, Europe, China and Japan are all going into recession at same time which is
unprecedented.

ELEANOR HALL: Well, we've just had the Deputy Prime Minister Julia Gillard respond to these jobs
numbers. Let's hear a little of what she had to say.

JULIA GILLARD: Obviously in these very difficult times, these are welcome figures. The global
financial crisis is of course, affecting the world economies right around the globe including our
own. The Government has always said that Australia won't be immune from the global financial crisis
and it will affect our lives here; including jobs here.

But in this context, these are welcome figures. The Government said to the Australian people that
in these difficult times, we do expect unemployment to rise.

ELEANOR HALL: That is the Deputy Prime Minister and Workplace Relations Minister, Julia Gillard and
Richard Lindell, analysing the numbers there.