Welcome to the latest edition of my economic note. Today's economic note is slightly longer than normal, with updates on the success of our economic stimulus, details of Stephen Conroy's announcement of significant microeconomic reforms in telecommunications, and a look at one of the most pressing long-term challenges facing our nation – the ageing of the population. I was in Sydney on Friday to formally launch the University of New South Wales' Australian Institute for Population Ageing Research, which will bring together researchers, government and industry to help inform debate about the challenges posed by an ageing population. One of the massive implications will be in terms of health policy, and on Friday I also delivered a speech at a fundraising lunch for the NSW branch of Alzheimer's Australia. Last night I presented the 25th Ben Chifley Light on the Hill oration in Bathurst, and by week's end I will be in Pittsburgh for the G20 Leaders and Finance Ministers' meeting.
The OECD released its Employment Outlook last week. The report delivered powerful new evidence that our economic stimulus measures have led the advanced world in supporting jobs during the global recession. The OECD stated that "even though many countries moved quickly to enact large fiscal stimulus packages, these packages generally have not had a strong effect in cushioning the initial decline in employment caused by the crisis, although Australia is a notable exception." They said specifically that "Australia's fiscal stimulus package seems to have had a strong effect in cushioning the decline in employment caused by the global economic downturn." The OECD estimates that employment in Australia in 2010 will be between 1.4 and 1.9 percentage points higher than what it would have been without our stimulus measures. That means around 200,000 more Australians will have a job because of our economic stimulus measures.
However, the OECD report paints a bleak picture of unemployment across advanced economies, which is forecast to reach nearly 10 per cent, leaving a massive 57 million people out of work. The OECD notes that "a growing number of OECD countries are already facing very large increases in unemployment and under-employment, and labour market conditions are likely to deteriorate further in the months to come." OECD Director John Martin put it simply that "OECD countries are facing a jobs crisis." This sobering global outlook confirms the massive challenge we still face as unemployment continues to rise here and around the world, and underscores the importance of delivering our stimulus measures in full.
This week's Fact of the Week comes from the Sensis Business Index, which surveys small and medium sized businesses throughout Australia. It reported a record improvement in business confidence during the September quarter, with confidence now at its strongest level since August 2007. It also reported that "small businesses are more optimistic about Australia's economic direction than they have been in more than a decade". Report author Christena Singh cautioned, however, that "improvements in confidence and expectations have been stronger than the improvements in actual performance, so there are still risks to the sustainability of the current economic recovery." You can read more about the report's findings in this article.
Last week's Westpac-ACCI Survey of Industrial Trends reported that expectations for future economic conditions rose in the September quarter to their highest level since the December quarter 2007. The index of current conditions also rose, though it still remains below the level signalling an end to contracting manufacturing activity. And while there was an encouraging improvement in labour demand indicators – which have risen to their highest outcome since September 2008 – they are still at levels that imply further job losses ahead. ACCI Director of Economics and Industry Policy Greg Evans commented that "given the continued weakness in the labour market and business investment, Australia's economy is not yet on the path of sustainable economic recovery. Therefore, it is premature to consider unwinding the fiscal stimulus that will continue to support domestic demand".
Last week we received the minutes of the Reserve Bank Board's meeting earlier this month, at which they decided to leave the official interest rate unchanged at 3 per cent. The minutes said that "members concluded on balance that the global economy was most likely on a sustained, if modest, recovery path, though it was still too soon to be confident of this assessment". The minutes further noted that "some uncertainty remained about the outlook both abroad and at home."
My colleague Stephen Conroy, the Minister for Broadband, Communications and the Digital Economy, last week announced historic microeconomic reforms to existing telecommunications regulations in the interests of all Australians, including consumers and businesses. These reforms will drive future growth and productivity by addressing Telstra's high level of integration, streamlining and simplifying the competition regime, strengthening consumer safeguards, and removing redundant and inefficient regulatory red-tape. Stephen said "these fundamental reforms address the long-standing inadequacies of the existing telecommunications regulatory regime. They will drive lower prices, better quality and more innovative services."
A day after the one year anniversary of the collapse of Lehman Brothers, Lindsay Tanner, the Minister for Finance and Deregulation, delivered a ministerial statement to Parliament setting out the reasons for the Government's current fiscal policy settings and our plan for fiscal policy into the future.
Population ageing is one of Australia's most important long-term economic and social challenges. In my speech launching the Australian Institute for Population Ageing Research, I discussed the new Intergenerational Report being prepared by the Government as a central part of our plans to tackle these challenges.
The new report projects Australia's population will reach over 35 million people in 2049, up 65 per cent from the current population of around 21½ million. This projection is significantly higher than the 2007 report's projection of 28½ million people in 2047. The new report also projects that the proportion of people aged 65 and over will rise from today's figure of around 13 per cent to 22 per cent in 2049. And we will see an even more rapid jump in the proportion of people aged 85 and over, with a projected increase from 1.7 per cent of the population now to 5 per cent in 2049.
As the ageing of the population increasingly impacts on GDP per capita and government spending per person, all levels of government will face growing fiscal pressures. The Government is committed to tackling these challenges so that we can sustain and improve the quality of life of the Australian people well into the future. One thing I emphasised in my speech was that an older population also provides new opportunities. Older people, who have contributed so much to our nation already, will want to keep contributing. We need to make sure we make the most of their experiences and accumulated knowledge, in the workplace and in the broader community.
The Prime Minister and I will attend the G20 Leaders and Finance Ministers' meeting in Pittsburgh later this week. We will be discussing the importance of fully implementing stimulus measures to support growth and jobs. All G20 members know just how fragile the global economy remains and just how dangerous it would be to rip support out from underneath the early signs of recovery in the global economy. The G20 will also work on reforms to the global financial system and ways to ensure a more stable and sustainable future growth path for the global economy.
This week we will receive the Reserve Bank's half-yearly Financial Stability Review and ABARE's commodities report for the September quarter.
The Government understands the devastating impact of unemployment on families, on communities and on the broader economy. That's why supporting Australian jobs has been our number one priority throughout this global recession. Australia's unemployment rate of 5.8 per cent remains lower than all but one of the world's major advanced economies. However reports like that released by the OECD last week demonstrate that the job is far from finished, and that unemployment will continue to rise as the full effects of the global recession wash through our economy. This is why it's vital we stick to our guns on stimulus to keep as many Australians in work as possible.
Treasurer of Australia
Sunday 20 September 2009