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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

16 October 2011

NO.039
[PDF 162KB

Treasurer's Economic Note

At the end of the day, a strong economy is all about jobs – creating them and protecting them. It's an obvious point but one well worth remembering as Europe and the United States struggle to rein in their excessive levels of debt. Bringing the debate back to jobs is a good way to focus the minds of policymakers on both sides of the Atlantic on the need for decisive action to deal with the current economic crisis. The International Labour Organization has warned that in the years ahead, millions more could join the 200 million people already on the world's jobless queues. Reversing this trend needs to be a priority for global leaders. Getting more people into work is not only essential for reducing poverty and increasing living standards, but also for ensuring long-term, sustainable growth. That's why Australia has worked hard to put job creation and skills investment at the heart of the G20 agenda.

More Than a Pay Packet

It's worth reflecting on what having a job means for an individual. It's much more than a weekly pay packet. Being employed can offer purpose, security, a greater connection with the community, and the promise of a brighter future. For the benefit it delivers, the creation of a single new job is a triumph. Multiply that by about 750,000 and you start to get a sense of what our nation has achieved over the past four years. All Australians can rightfully be proud of this record of job creation, particularly given the tens of millions of jobs lost around the world since the onset of the global financial crisis. For some perspective, it's worth comparing our jobless rate of 5.2 per cent with those of other developed economies:

  • Euro area - 10 per cent
  • US - 9.1 per cent
  • UK - 8.0 per cent
  • Canada - 7.1 per cent

It's easy to forget that before the GFC struck, our unemployment rate was the same as that in the US. An extra 466,000 Australians would be out of work today if that were still the case. While three-quarters of a million more Australians have entered the workforce in the past four years, 7 million Americans have lost jobs over the same period. When the crisis struck, Australia's swift policy response kept tens of thousands of people in work, bringing home pay packets for their families. We stood almost alone in the developed world in avoiding recession because of our actions to shore up consumer and business confidence, keep funds flowing through our financial system, and invest in new public works. Employment outcomes were the top priority of this Government then and they remain so today.

Jobs data out on Thursday underscored the strength and resilience of the Australian economy in the face of the current global instability. The unemployment rate fell marginally to 5.2 per cent in September, down from 5.3 per cent, with 20,400 new jobs created in the month and taking the increase to more than 120,000 in the past year. Of course, we know that our economy won't remain untouched from global developments, but we shouldn't lose sight of our tremendous record of job creation over the past few years and what that has meant for the lives of hundreds of thousands of Australians.

Almost three years ago to the day, an emergency G20 meeting was held in Washington as the global economy teetered on the brink of catastrophe. I remember very vividly sitting around the table with my G20 colleagues as we resolved to take the necessary action to avert a global economic meltdown. The threat we face today is just as serious. If the worst fears for Europe are realised this time, the impacts on our own economy could be just as severe as those in 2008. That's why international engagement is just as important now as it was at the height of the GFC.

While the European sovereign debt and financial crisis is a European problem, it has the capacity to affect us all. I've been encouraged by the success of our efforts through the G20 in propelling more action from our European colleagues. Slovakia last week became the 17th and final Euro country to approve an expansion of the European Financial Stability Facility, a bailout fund that will be able to assist troubled banks and offer lines of credit to governments.

Working Together

At this weekend's G20 Finance Ministers Meeting in Paris, I've stressed the need for my European colleagues to take further steps. Europe needs to regain the confidence of the markets and show it's capable of meeting its debt obligations. It also needs to demonstrate that the current sovereign debt crisis will be resolved in an orderly way, with efforts to avoid the contagion spreading. I welcome the commitment from leaders in Germany and France to outline a comprehensive plan to recapitalise banks and find a durable solution for Greece's debt load. But more needs to be done. The task is daunting, but there was clear resolve among European finance ministers to continue their work. It's now critical that European leaders deliver on their commitments at their October 23 meeting. I have also been highlighting the importance of the G20 working together to ensure that the IMF has sufficient resources to assist with the difficult adjustment required in Europe and meet all possible contingencies. This important issue will be discussed when the Prime Minister meets with her G20 colleagues in Cannes in three weeks time.

Like Europe, the US also needs to put in place a credible long-term plan to get their budget in order. Tough decisions must be made on both spending and tax measures. There also needs to be a concerted effort to support the faltering US recovery and create jobs for the millions of unemployed Americans, which is why despite the disappointment of the US Senate vote, we still need the major components of President Obama's jobs bills passed in some form.

Developing countries also need to do their part. More needs to be done to lift domestic demand and move to more flexible exchange rates. I made this point directly to Chinese leaders on a visit to Hong Kong and Guangzhou in August, and it's one I've continued to make in Paris.

A Position of Strength

You can't quarantine a problem in one part of the global economy. That's why we must all support Europe as it wrestles with its problems. Clearly Australia is not immune from developments in the Northern Hemisphere, and if the worst fears are realised in Europe, that will inevitably flow through to our region, our economy and our budget bottom line. We face this crisis with confidence, built on our strong fundamentals, our very low debt, low unemployment, and our proven track record of dealing with global instability. Because we avoided recession, our budget position is one of the strongest in the world.

No one should use problems in the global economy as an excuse for inaction. Now is not the time for policymakers to sit on their hands. Europe and the US must show political will to deal with the crisis. Australia is in a very different position, but that is no reason to hit the pause button on our reform agenda. We need to continue with the sorts of critical reforms that have made our economy amongst the strongest in the world. It's why we're building a super-fast broadband network. It's why we're making record investments in skills and training. It's why we're reforming the tax system to provide more reward for effort and better incentives to invest. And it's why we're putting a price on carbon so we can drive the transition to a low-carbon economy. The passage of the Clean Energy Future package through the House during the week shows this Government is getting on with the job of building a stronger, sustainable and more secure economy.

Wayne Swan
Deputy Prime Minister and Treasurer of Australia
Sunday 16 October 2011

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