Unemployment to Reach 12 Year High

Thousands of more Australians will find themselves without a job next year, according to Federal Treasurer Joe Hockey.

Hockey released his Mid-Year Economic and Fiscal Outlook (MYEFO) last week which revealed that Treasury thinks the unemployment rate will now increase from 6.3 per cent to 6.5 per cent next year.

If the predictions are correct, Australia’s unemployment rate will reach its highest level since 2002, five years before the Global Financial Crisis.

This is despite Hockey’s statements that the average number of new jobs created this month was more than double that of 2013.

The Treasurer indicated that older people leaving the workforce and young being staying away from it was partly to blame for the predicted figures.

“The unemployment rate is expected to drift up to 6¼ per cent by the June quarter of 2015,” Hockey’s report said.

“The fall in the participation rate reflects both demographic factors as the first of the baby-boomer generation reach retirement age and a ‘discouraged worker’ effect, with some younger workers opting out of the difficult search for work in the non-resources sectors of the economy.”

Hockey said that those Australians with jobs could also expect their income to grow at a slower rate.

“Forecast wage growth has been revised down to 2¾ per cent through the year to the June quarters of both 2014 and 2015,” the report said.

“Wage flexibility is an important adjustment mechanism that supports employment during periods of slower economic growth.

“The current environment of slow wage growth is the flip side of the experience in the mid-2000s when wages grew strongly and capacity constraints emerged as the resources investment boom gathered steam.

“The subdued outlook for employment and wage growth means that total compensation of employees is expected to continue growing at its slowest rate since the early 1990s.”

Despite Treasury’s projections, Hockey said overall 2015 would be a better year than 2014.

“2015 will be a better year for the Australian economy,” he said.

“Lower energy prices, a lower Australian dollar and interest rates at historic lows continue to facilitate stronger economic growth.

“Massive investment in new and upgraded roads, and in transport and business infrastructure, will strengthen the productive capacity of the Australian economy.

“In addition new trade deals with Korea, Japan and China will deliver broader and deeper market access, particularly for Australian small businesses.

“We also expect housing construction to strengthen which will further boost economic activity.”