Welcome to the latest edition of my economic note. The number one priority for the Rudd Government is to keep Australians in work, so to learn last week of an increase in unemployment was certainly unwelcome news. We know that every single job lost is one too many, and we do feel for all workers and families who suffer as a result of the ravages of the global recession. That's why we won't rest until we've done everything we responsibly can to support jobs and cushion Australians from the worst of the global recession.
Thursday's labour force figures showed the unemployment rate rose by 0.2 per cent in May, to 5.7 per cent. This increase in unemployment shows the global recession is washing through the Australian economy.
The Government has acted decisively to stimulate the economy and cushion Australians from the worst effects of the global recession, with three phases of stimulus – cash stimulus payments, shovel-ready projects, and large-scale nation building infrastructure. There is no doubt that without this decisive action, unemployment in this country would be much higher.
It is an unfortunate fact that the global recession is having a devastating impact on jobs around the world. We know that unemployment rates have risen to 7.1 per cent in the UK, 8.4 per cent in Canada, 9.2 per cent in the Euro area, and 9.4 per cent in the US. As somebody remarked to me on Friday, the grass isn't any greener on the other side of the world.
There are challenging signs in the economy when it comes to jobs, but there are some encouraging signs in other numbers we are getting.
For example, we received further news last week that our stimulus is helping to support housing activity. Housing finance data showed the number of housing finance commitments for owner-occupiers rose for the seventh month in a row in April, having fallen in each of the eight months prior to the announcement of the Government's First Home Owners Boost.
The proportion of loans to first home buyers increased to 28 per cent in April, the highest level since the series began in 1991. You can read more about this result, including market economists' reactions and the importance of the First Home Owners Boost and significant interest rate cuts, in the article linked here.
This week's Fact of the Week comes from the Westpac-Melbourne Institute Survey of Consumer Sentiment. It found that consumer confidence rose by 12.7 per cent in June, the biggest increase in the last 22 years. Westpac Chief Economist Bill Evans described this as "a truly remarkable result." He said that "It is very likely that the dominant factor behind this extraordinary rise was the release of the March quarter national accounts last Wednesday which registered a small but nevertheless positive growth rate for the Australian economy in the March quarter". Mr Evans also commented that "this surge in the Index can be seen as a delayed response to the significant stimulus over the last nine months."
While we don't get carried away with month-to-month readings of consumer sentiment, it was encouraging to see further evidence of the positive impact our economic stimulus is having in the community.
We also received the results of the NAB Monthly Business Survey last week, which found that business confidence rose sharply in May, to record its best outcome since February 2008.
NAB Chief Economist Alan Oster commented that "The improvement in confidence has developed more momentum – no doubt helped locally by the Budget and globally by improving sentiment and equity/commodity markets. … The trend improvement in confidence has been evident across all States – consistent with the gradual flow-through of lower interest rates, the further stimulus from the Budget directed at infrastructure and improved commodity markets."
Mr Oster noted that the improvement in business confidence "was broadly based but particularly marked in the domestically-driven industries, with notable improvements in construction, manufacturing and wholesale, taking heart from Budget infrastructure spending. … The stimulus from the Federal Budget has clearly raised hopes of a government investment-led recovery, with construction industry confidence leading the way."
However, other results from the NAB Monthly Business Survey served as a reminder that we face a rocky road ahead, with news that business conditions continued to worsen in May.
This week we will receive more news of the impact the global recession is having on jobs overseas, with the release of UK unemployment data for April. Here at home, we will receive lending finance figures for April.
I'm looking forward to speaking tomorrow at CEDA's annual 'State of the Nation' conference. I'll be discussing the Government's economic strategy to deal with the substantial jobs challenge ahead of us, and also the longer-term consideration of how we capitalise on the big opportunities that will present themselves in the months and years to come.
While we received some good news last week on the housing and confidence front, there is no room for complacency. The global recession will continue to batter our economy, and like other nations, we need to brace ourselves for more job losses in Australia. But Australians can remain confident that their Government will continue to do all it can to stimulate our economy and support jobs in the midst of the global recession.
Treasurer of Australia
Sunday 14 June 2009