With a 1.2 percent contraction in Gross domestic product (GDP) and a loss of 80,000 full-time positions in the past two months there are fears that the Australian economy may be weakening. But closer examination of the data reveals long term strength.
GDP fell by 1.2 percent in the first three months of the year, the first downturn since December 2008. The Australian economy also has lost 80,000 full-time positions in the past two months, which, apart from the worst point during the global financial crisis, is the biggest fall since the 1991 recession.
Financial markets and economic commentators, point to Australia’s underlying exposure to the slump in the United States, the worsening European debt crisis, and signs of slowing growth in China.
The credit ratings agency Standard & Poor’s last week warned that prices of coal and iron ore could drop by as much as half in the event of a “severe downturn” in China: “With commodities prices having been at or near record levels earlier this year, and subsequently subsiding only modestly.
Standard & Poor’s warned that even a “significant deceleration” in China and other “emerging economies” could cause the bubble to burst. Coking coal prices could drop from $US180 a tonne to between $100 and $120, and iron ore prices from $175 to $85-$95 per tonne.
Australian treasury modelling has underscored the intensifying destruction of manufacturing jobs. Ten years ago, manufacturing employed 1.08 million people in Australia, about 12 percent of the workforce. Today, it has shrunk to 990,000, or 8.8 percent of total jobs.
Australian Treasurer, Wayne Swan dismissed the fall in full-time employment as the normal monthly variability in the Australian Bureau of Statistics jobs survey.
“You can’t judge the overall labour market just by one particular set of figures for one month,” Mr Swan said. “When you’ve got an unemployment rate with a four in front of it, that’s still a pretty good outcome for the country.”
The jobless rate remains at a healthy 4.9 per cent, with part-time positions rising by 29,800 in May. The Australian Bureau of Statistics assessment of employment trends shows employment growth is strongest in Western Australia followed by South Australia. There is modest growth in Queensland, while Victoria is showing no change. NSW, Tasmania, ACT and the Northern Territory are all suffering job losses.
With regard to GDP Mr Swan insisted: “Growth should recover strongly as mines return to more normal levels. Australia’s terms of trade are at record levels and a strong pipeline of mining investment is now well underway.”