It was ironic that I was about to talk to a group of highly successful entrepreneurs and business builders in Adelaide when the job numbers were released. They came with the national unemployment sneaking up from 4.2% to 4.3% but the SA jobless rate went from a big 6.9% to a scary 7.3%.
That was ironic because these members of the Young Presidents Organisation were all historically significant job-creators and it was my job to tell them what I thought was going to happen to the Australian and their local economy.
The SA story of what’s wrong and what has to be done will have to wait for another time but some of the cause and a lot of the solution is rooted in disappointing and dysfunctional leadership, which created what has become known as the revolving door of Prime Ministers in Canberra.
Labor started it off with the party not sure who they wanted as PM. Then the Coalition kept up the madness going from Tony Abbott to Malcolm Turnbull to Scott Morrison. The current PM’s victory speech indicated that at long last we had the right person in the top job. And as I write, Morrison is preparing to dine with the leader of the free world (and one of the most unusual US Presidents, ever).
However, like Trump or not, his strength is that he is on the front foot. He’s leading from the front. He actually tweets what he thinks or what he wants his voters to think. Whether you can trust his dialogue or not, you do know what he wants.
In a nutshell, he wants a better deal for the US on trade. He thinks the accommodation of past administrations has been too weak and the likes of the Chinese, the Canadians, the Mexicans and the Europeans have played the US off a break. It was time to stop some of the unfair practices.
Sure, his view coloured by some of his own one-eyed views, but most of us have heard of China’s hardball tactics with businesses trying to do business there. Stealing IP and strong arming overseas companies was tolerated when China was weaning itself off Mao’s Communism. Now as it has become the world’s second biggest economy, it’s time to play fairer. That’s where Trump’s trade play is understandable but it doesn’t help me like what he’s doing, as his trade play partly explains why the global economy is talking about a possible recession!
So in that context, these job numbers and what ScoMo says to Donald and what he learns from him will be important. I hope he can use that information to help the Reserve Bank make the right calls. He also needs to say ‘stuff’ that will get business investing here because if he doesn’t, we might not only see the cash rate go to 0.75% on Tuesday week, it could go a lot lower. I don’t want that and I don’t think it’s necessary.
However, leadership, which has caused many of our problems, needs to come to our rescue!
In my perfect Pete world, ScoMo would come home from Washington and tell us that a trade deal will happen.
That would make the RBA hold fire on more cuts, until they see the deal and gauge the market reactions. News like this would help businesses start to invest. And it would eventually flow through to consumers, as the stock market spikes and headlines start to create optimists rather than pessimists.
And given the headlines from Thursday’s jobless numbers, we need a fearless leader to paint a believable picture of what will happen in 2020 following a trade deal. And ScoMo is the man to pick up the brush (with a little bit of help from Josh Frydenberg, who really isn’t quite the creative rev-up merchant as the PM).
To be objective, the August jobs report didn’t help confidence as most business decision-makers and potentially big-spending consumers might only know that unemployment increased from 5.2% to 5.3%. However, new jobs were up 34,700, while only 15,000 were expected by economists. Sure, 50,200 were part-time so some full-time jobs were lost but these numbers jump around month to month. The July report showed full-time jobs rose by 34,500, while part-time jobs up by 6,700.
Also, the participation rate again rose to a record high. We economists see this as a positive for the economy, as more workers willing to work is a positive sign for growth.
Against that, the SEEK job ads numbers aren’t great, with Sydney’s ads down 16.9% while Melbourne’s are off 11.9% over the year.
One thing to note is that the official job stats are lagged. They are influenced by what happened 6-12 months ago and looking at the growth numbers coming from this pre-election period, it’s really surprising that they are still so good!
In an ideal world, Scott Morrison will come home from Washington with trade deal news that will raise confidence. Then he can reinforce that by reminding us of the two rate cuts, the tax cuts, the rebounding housing sector with prices starting to rise again and a Government committed to infrastructure spending.
If a trade deal happens, interest rates can stop falling, the Government with its Budget in balance and heading towards surplus can spend more, say to offset the negatives for growth from the drought and to reduce traffic congestion in our major cities.
Leadership — local and international — got us into this economic mess and leaders have to help us get out of it.
If you liked this article you'll love the Switzer Report, our newsletter and website for trustees of self-managed super funds. Click here for a FREE trial and to hear more of Peter’s expert commentary and advice.