Unemployment will rise to above 11pc
letter published in The AFR, 19 January 2009
It is difficult to believe that acting Prime Minister Julia Gillard is reported as sticking to forecasts of unemployment of 5 percent by mid 2009 and 5.5 percent by mid 2010 ("Jobless rate climbs to two year high", January 16).
Nobody believed that, when made, these official forecasts were anything more than an attempt to calm the masses, but that stage has surely long passed.
There can now be no doubt that our unemployment by mid 2010 will be much higher than 5.5 percent and, if the Government proceeds with both Fair Work Australia and the introduction of targets to reduce CO2 emissions as announced, it will probably exceed the 11 percent level it reached after the "recession we had to have".
The marked and increasing deterioration in economic conditions in major overseas countries clearly requires recognition that the feedbacks effects for Australia will be seriously adverse. Although the coalition left Australia in good economic shape, that has all changed and, by contrast with the bonus we received earlier from favourable terms of trade, we now confront a situation in which Australia may experience worse prospects from external influences than other countries. None of this seems to have been recognised by Rudd ministers, two of whom are now taking off to attend yet another round of waffle at Davos when they should be here examining urgently what should be done to help our domestic situation. One clear message that has been around for some time is that, despite the help they have received from the Government, Australian banks are for one reason or another unable to provide an adequate supply of credit.
US Federal Reserve Chairman Bernanke indicated this week that in the United States fiscal action will not be sufficient on its own to assure recovery there. But, although Australian banks are in much better shape than their US counterparts, the same applies here, partly because the funding from foreign banks has dried up and partly because the uncertainty about the depth of the recession makes it difficult to decide what businesses are credit worthy. Clearly, the Australian Government needs to "close the credit gap" just as the UK and German and US governments are trying to do. Cancel your visit to Davos, Mr Rudd, and get to it.
Des Moore
Director, Institute for Private Enterprise
South Yarra, Vic