In recent times, Australia has seen a slow but consistent growth in the GDP, with an increase of 3% (inflation adjusted GDP) recorded in the last 4 quarters of 2015. Yet the unemployment rate in Australia is continuing to rise. According to official data, wages growth in Australia for Q4 was 1.2%, the lowest it has been in 20 years, with the unemployment rate continually falling since the middle of 2015. The fall of 0.2% in commodity prices caused the Gross National Income (GNI) to be weaker than the GDP with our unemployment rate sitting at 5.7%.
SIRA Group’s latest GDP forecast explains that there are 3 major factors hurting our employment rates.
Lack of new mines and mining infrastructure:
The mining boom in Australia saw a peak in employment through both the construction and development of new mines. However, the decline in new mine sites has seen a dramatic fall in the industry and employment rates in turn. In 2012, mining investment in plant and equipment was sitting at 6.5% GDP – dropping to 3.5% last year
According to the ABS, employment in the mining industry as a whole has fallen 6.9% in 2014/2015, with the deepest drop felt in the Exploration and other mining support services, seeing a 19.3% drop in employment rates. Although Australia is exponentially growing its mineral exports, this employs dramatically fewer people than new mining infrastructure.
The loss of the car manufacturing industry in Australia will have massive impact on employment rates in Australia. It is estimated that the departure of the industry will result in a loss of between 100,000-200,000 jobs. SIRA Group estimates that this loss will increase unemployment rates by over 1%.
Federal fiscal deficit and rising Aussie dollar.
SIRA Group believes that the sharp blow out of the federal fiscal deficit will limited increased government spending – which is a common reaction to economic weakness, and in turn will affect unemployment rates. The rising Australian dollar will also negatively affect our growth and in turn employment rates.
It is believed that the share market will be largely unaffected by the slowdown in Australia for the short-term, with expectations on the Chinese Economy to bring an upswing, and the “easy” money in the US, Japan, Europe and China.