Australian Economy Doing Better Than Expected

Despite gloomy Australian Treasury predictions of unemployment above 8 per cent, it appears to have peaked at 5.8 per cent last year.

Australian Business Economists, according to the Reuters consensus forecast, were predicting an unemployment rate of between 5.6 per cent and 5.9 per cent, with an average of 5.7 per cent. Today’s figures from the Australian Bureau of Statistics showed that unemployment fell from 5.7 to 5.5 per cent in December.

And CommSec’s Craig James told ‘The Australian Online’ part of the problem was economists needed to get out from behind their computer screens and talk to small and medium business in Australia.

“We track economist predictions over time and it’s pretty clear they have been far too bearish on the job market,” he said.

“Part of the problem is economists aren’t getting out of their offices enough and asking Australian businesses, `what are you doing?’

“A lot of Australian business was telling us, `we’re not slashing payroll, we’re cutting hours and pay’.”

Mr James said population growth was one of the keys to why the Australian economy was doing better than expected.

“The other thing which a lot of people fail to realise is the demographics and one is in terms of population growth which is the fastest of any developed economy in the world. We’ve got population growth of 2.1 per cent,” he said. Part of this growth is due to business migration.

“That creates demand for employment and demand for retail spending.

Economists have consistently underestimated the strength of the labour market.  What the Reserve Bank is doing is a lot more liaison with businesses and they are putting a lot more stock in that when determining policy.”

“(Treasury) also have a business liaison program, perhaps they need to put greater emphasis on that rather than there models. What was missed is that bosses cut down on hours and pay. So it’s about flexibility.”

Source The Australian