We’ve all heard the saying, “Pride comes before a fall”, and there’s no denying that Australia has been basking in the glow of its relative economic glory for some time now.
But have we been a bit too boastful about our financial health on the global stage?
Post-GFC we were reveling in record jobs growth, with 194,000 new positions created in 2008, and wondering why so many other world powers seemed to be floundering when it came to keeping their proverbial heads above water.
Super economies like the US and Europe looked upon Australia with envy and our politicians patted themselves on the back, but now our economy finds itself at a crossroads as our employment market starts scaling back jobs at a rate of knots.
According to a news.com.au article, we are in the midst of a jobs crisis the likes of which has not been seen since the “recession we had to have” late last decade.
Around 100,000 jobs were cut last year, representing the first time since 1992 that more jobs were lost than created and reflecting similar instances in 1982, 1990 and 1991; all years that directly proceeded periods of recession in the Australian economy.
Then of course there were the claims made by Treasurer Wayne Swan last May when he, perhaps prematurely, insisted that his budget would create 500,000 new jobs and drive unemployment to 4.5 per cent.
Conceding that ongoing worldwide economic turmoil has caused Australian job creation to slow, acting treasurer Bill Shorten was nevertheless loathe to admit defeat saying, “While employment growth has slowed in the face of heightened global uncertainty, we’ve seen workers pick up a few extra hours of work each week.”
But are things really as bad as the media would have us believe?
Sure, some people have been very unfortunate in these harder, less certain economic times; and that’s across the board in terms of being able to meet their mortgage repayments and holding steady employment.
But our overall unemployment rate is still sitting at a relatively low 5.2 per cent.
Most analysts are more concerned about the less publicized “participation rate”, which measures how many people are actively working or looking for work.
This is now at 65.2 per cent, which is the lowest it’s been for two years.
CommSec economist Savanth Sebastian says, “This is the first definitive sign that some people have started giving up looking for work, and to be honest the situation in NSW is most likely going to get worse before it gets better.”
So should we all fear an impending recession for the Australian economy? I don’t know.
What I do know is that when people start talking up the “R” word, consumers get spooked and homebuyers tend to sit on their hands.
That’s when smart investors, who have lived through past recessions and know it is just another glitch in the economic cycle, tend to make their most lucrative deals.
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