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Trend unemployment rises as government paralysis continues

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158/91 6 June 1991


"Had not the downfall of the Scullin Ministry taken place when it didf it would have come soon after, .because in the Federal sphere Labor did not possess a fundamental unity of viewpoint and policy sufficient to enable it to continue efficiently in office " W. Denning "Caucus Crisis" 1982.

The continuing rise in the trend rate of unemployment in the labour force figures released today emphasises the policy paralysis created within the Hawke Government flowing from the leadership crisis and subsequent factional infighting.

The ideological differences between the different factions is now bubbling to the surface as the Government struggles to find a strategy for recovery.

While some on the Right Wing of the Party would clearly wish to embrace a program for recovery similar in most details to that proposed by the Coalition, the Left Wing of the Party has now grabbed the centre stage.

Prime Minister Hawke is now totally dependent on the Left for continued occupation of his position and many now fear that today's number, which underlines once again the massive failure

of the policy prescriptions of Paul Keating, will ensure that the Left's agenda of public spending and public ownership dominates the remaining days of the Hawke Government.

The recent Premiers' Conference was a bad omen.

It gave a very generous boost to State and Territory budgets just at a time when we need to get real interest rates down to boost rapidly sagging business investment.

And the Deputy Prime Minister, and now Minister Assisting the Prime Minister in Commonwealth/State Relations, is out promising more. More money for urban infrastructure, more money for industrial infrastructure, more money for Victoria, more money

for special interventions to industry to "stimulate" exports.

And the other interventionists such as Mr Dawkins are jumping on the bandwagon.

Little wonder that the bond and currency markets have taken fright.




If the Government wishes to allay the rising fears in financial markets and boost business confidence, it must act quickly to develop a believable strategy for recovery.

Trend unemployment is running at 9.6 per cent of the workforce and, by the Government's own optimistic projections, will rise to 10.75 per cent or around 900,000 people (assuming no collapse in participation rates). In fact, it will probably be much larger.

That pool of unemployed will prove difficult to reduce.

Even if one believed the Government's own optimistic "forecasts", the recovery we are looking at in 1991/92 will be tepid by

standards of past recoveries.

It is time the Prime Minister and the Treasurer admit this to average Australians.

That is not talking your country down.

It is a necessary part of obtaining support for the tough

measures that must be tackled.

Look at the Government's present position.

It has no strategy for recovery.

It has no policy to obtain price stability.

Mr Kerin says he wants to get real interest rates down by

lowering inflation, but he will not commit to price stability. The result is that an "uncertainty" factor is built into real interest rates which, in turn, inhibits investment.

It has no fiscal policy direction. The Treasurer talks in a fuzzy way about retaining a "structural budget surplus" but nobody, especially the new Treasurer, can understand the operational significance of this "target".

But Mr Howe has no doubts about the appropriate fiscal stance.

" There appeared to be a fetish with some for our public sector borrowing requirements to never again be positive....Like any fetish, that notion has no place in public policy development... It follows that any notion that assumes the zero PSBR is

immutable is to be rejected" Canberra Times 4 September 1990

It has no wages policy. Paul Keating and Bill Kelty stitched together Accord after Accord and had them rubber stamped by the Industrial Relations Commission. But that is all over now.

And there is nothing left to fill the void because the unions wish to dictate any new guidelines and are not willing to enter into genuine discussions with employers about enterprise level bargaining.


And what about Coronation Hill and all the important signals that the likely rejection of that project would send to investors?

Finally, the Government has to get on with structural reform. Notwithstanding the Prime Minister's claims to the contrary only weeks ago, the whole process of waterfront reform, which is rightly seen as a measure of its bona fides in this area, has

bogged down.

The warning bells are ringing. If the Government cannot quickly regather itself, history is likely to pass judgement on it as Mr Denning did on the Scullin Government.

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