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It's raining jobs but will Scott and Josh keep theirs?

Peter Switzer
18 March 2022

Last Friday for a treat we spent the night in the Park Hyatt at the Rocks. I used to feel so sorry for this great hotel and I guess for all of Australia when we’d go for a walk during the lockdowns of the past. An empty hotel with no staff, no guests and no Asian couples in wedding outfits taking shots of their beautiful clobber outside the hotel, with the Sydney Opera House in the backdrop, was a tragic image of the plague that was the Coronavirus I’ll never forget.

That’s why I told Chris Smith in my 2GB spot on Saturday morning that I’d seen a great real-life economic indicator showing our economy was on the comeback trail! And this week’s jobs report showed statistically what I saw last weekend.

On Saturday I flew to Melbourne where our magazine Harper’s Bazaar was the media partner for the Melbourne Fashion Festival’s event at Margaret Court Arena, where the numbers attending showed that the southern capital’s crowd are out and well and truly about. And this story was replicated as we walked from the MCA to our place in Hawksburn.

Chapel Street at 10pm is a crowded wild scene on Saturday nights and no one was looking like a constrained consumer, which is a good sign for the economy as well, provided it doesn’t facilitate another new strain of this damn virus.

To the numbers and in February (which was still an Omicron-infected month) full-time jobs were up 121,900 and total employment hit a record high of 13.37 million. That’s been achieved without the usual 400,000 plus foreign workers, who used to be in the workforce before the pandemic struck.

The rebounding economy not only has put the most number of Aussies in work ever, it’s taken the unemployment rate down from 4.2% to 4%, which is a 13½-year low — and we haven’t seen a jobless rate like this since John Howard was PM.

And not surprisingly, the participation rate (the percentage of the workforce in or wanting to work) is at a record high, moving from 66.2% to 66.4%.

This is a positive story that I’m sure Scott Morrison and Josh Frydenberg will remind us about ahead of the expected election in May, and at least it shows the whole shocking tragedy of Covid-19 hasn’t been a complete waste.

This development and the good sense that was JobKeeper could also get a mention or two (hundred!) over the pre-election period, but it’s justified.

Australia dodged a big recession or even Great Depression bullet, and even though we’ll have to pay for it in the future via taxes and less helpful governments, avoiding the scenes famous from the 1930s Great Depression was an economic godsend.

Interestingly, economists have often looked at the Coalition’s economic stimulus program that has helped create this terrific jobs program and said it was a very Labor-like response to a potential recession threat. And they’re right.

So here we are with a great economy, tourists are coming back, Qantas tells me domestic and foreign flights are getting back to good capacities and we’re freighting in foreign workers to help the hospitality sector cope with our demand to want to go out and eat, drink and be merry.

It's social normalcy breeding a more normal economy so in the upcoming Budget on March 29 Treasurer Josh Frydenberg has to pull off a double play.

On one hand, he has prepared an economically responsible Budget, but on the other, he also has to dangle some goodies to help his boss win the election, where they’re starting as underdogs.

He will have the good news that “lower-than-expected welfare payments and higher tax revenues means the bottom line will show a ‘substantial improvement’ on the most recent forecast of a $99 billion deficit,” the AFR’s Phil Coorey reported today.

A better Budget outcome means lower government debt going forward — and that’s why the economic rebound is so important. The faster we grow, the greater the tax collections and the less government spending is needed because businesses, consumers, exporters, foreign students and overseas travellers will all help reduce our need for government assistance.

And it’s time for governments to butt out, with Aussies armed with $251bn in savings built up over the lockdowns when it was a lot harder to splurge and businesses have $182bn on their balance sheets, which you could call business savings that can be used to create jobs and power growth.

All this will help reduce the budget deficits going forward and the debt of governments in the future.

So now all we have to do is headwinds out there that could take the wind out the economy’s sails right now.

What would they be?

1. The Ukraine war.

2. A new Covid-19 outbreak in China and city lockdowns that could hurt global supplies and add to inflation concerns.

3. Rising inflation not helped by China’s. Coronavirus challenges and the war’s impact on oil and other commodity prices.

4. The US Fed is set to raise interest rates over the next six months or so and that will add pressure on our RBA to eventually start raising rates too.

5. A federal election, which is never great for confidence.

6. And the story today that unions are looking for a 6% pay rise to offset predictions of 5% inflation ahead.

What I’ve described is what the stock market experts call “the wall of worry” that share markets are always climbing until they correct, or worse still, crash!

Right now markets are becoming positive on the future but this sentiment can turn on a dime. Fortunately, one powerful force for positivity is a very strong economy, so keep your fingers crossed that this economic momentum that’s creating these jobs and rising consumer and business confidence can be sustained.

I’m positive on stocks over 2022 but it does mean many of the above headwinds turn into zephyrs that won’t force the good ship of the Aussie Economy onto the rocks.

And given all that, it will be interesting to see who we select to steer the ship of state after May.

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