Australia’s grim reaper economy versus the US

 

The Australian “grim reaper” economy, as Shadow Treasurer Joe Hockey called it today, currently has an unemployment rate of 5.2%. That is low by historical standards (average for last 30 years is 7.2%) and sits well against 7.7% in the US, 11.7% in the Eurozone and 7.3% in New Zealand, to name a few.

No one seriously expects the unemployment rate to go above 6% despite the current soft patch for growth, while the RBA and Treasury reckon it will stay near 5.5% over the next year or so.

This is a rolled gold performance in anyone’s language.

Contrast this with the US, where Chairman of the Federal Reserve, Ben Bernanke, said this morning that interest rates will be left at zero, yes zero, where they have already been for four years, and the Fed will keep printing money (US$85 billion a month in fact in quantitative easing) until the unemployment rate gets down to 6.5%.  Not the “grim” 5.2% in Australia, but 6.5%.

Looking through the labour force series and it was in January 2002 that Australia last had an unemployment rate that high!

There is a staggering chasm between the Tea Party type distortions on the Australian economy and the hard economic facts from the likes of Joe Hockey, Andrew Robb and Tony Abbott. These ridiculous comments, calling black white and up down seldom get queried in the media. It is not clear why they are not held to account other than bias or a lack of economic expertise from those asking the questions. That might be fair enough, but unrelenting negative coverage risks changing spending and investment behaviour to the detriment of the economy.

A yet-to-be confirmed revenue shortfall in the budget of about 0.25% of GDP due to an unexpected fall in the terms of trade gets Page 1 treatment and other blanket coverage because the budget may register a deficit of less than 10% of Gina Rinehart’s wealth. But then it again it might not. There are still 8 months of budget data to come before we know the budget result.

I am not sure why this matter, but it seems to be more important than holding those who may well be in government next year to account for their economic commentary and competence.