Anthony Albanese has severe economic problems on his plate. Here are seven of them


ANDAll the new governments face challenges, but the Albanian government faces some very unique economic challenges that no previous government has had to deal with in terms of the country’s governance. Let me explain.

Migration and labor

Last week, when the unemployment rate reached 3.9%, I wondered if people knew how weird things were in the workforce.

I tweeted the following graph to point out that the workforce is far from normal:

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There are now 139,100 fewer people aged 15-34 in the workforce than in March 2020, and compared to the trend since 2015, this is about 354,000 fewer than expected.

All this is due to closed borders during the pandemic and a reduction in the number of foreign students working part-time.

This is a significant output gap, which is why there is so much talk about labor shortages.

It will change as migration opens up, but it is also likely to lead to higher unemployment rates – purely because the unemployment rate is divided by the mathematical equation of the unemployed by the labor force.

But to increase production, in addition to increasing productivity, you need more work.

Tourism and hospitality

The impact of border closures will hit the tourism industry hardest.

The last short-term arrivals of visitors show how strange things remain:

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Yes, the borders are opening – but will the numbers return? Given rising inflation (see below) and lingering concerns about Covid, how long will it take for international travel to return?

That is why 35% fewer people still work in air transport than before the pandemic, and why both accommodation and food and drink are among those that have yet to reach pre-pandemic levels:

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Higher education

Another area affected by the lack of migration is the higher education sector.

A decade before the pandemic, we expected a growing number of foreign students – especially from China and India and other Asian countries. Then the borders closed and the numbers dropped.

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They are slowly recovering, but will Chinese student numbers return to previous levels due to international disputes between China and Australia?

This is terrible for the sector if our tertiary institutions continue to be funded in a way that not only encourages more international students, but also requires them. It is one example of how when things go “normally”, hidden problems are hidden.

Pandemics and border closures have destroyed tertiary funding, our tourism industry and the supply of young part-time and casual workers. Discard the fact that raising migration numbers also brings with it an increased risk of wage theft and mistreatment of workers, and the new government has to deal with a lot of clutter.

Cost of living and inflation

The number one election topic according to the length of the straight was the cost of living.

The problem for the government here is twofold.

First, much of inflation comes from overseas.

The prices of many commodities – whether they are goods that we consume directly or that are inputs for other products (such as urea for fertilizers) – have risen surprisingly over the last 6-12 months:

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There is nothing the government or the Australian Central Bank can really do to influence this.

But also in Australia, our own habits cause inflation to rise faster.

The pandemic prevented us from going out and using the services. Meanwhile, given the stimulus measures that were put in place during the pandemic to keep the economy moving, we bought masses of goods.

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In fact, we buy goods as if we were the mother of all times of economic boom, and we buy services as if we were in recession.

Combine this with the rise in world commodity prices, and last year the price of goods rose by an average of 6.6%, while the cost of services rose by 3% more normally.

Interest rates

No government has ever begun its term with the absolute certainty that interest rates will only rise higher – because they are already at the bottom.

But not only do they have the lowest interest rates, but they also face the sharpest rate hikes ever predicted:

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The market predicts an increase in monetary rates by three percentage points in the next 12 months.

I think it would cause a recession, but rates are still going up.

But in 2009, when the RBA raised the cash rate by 1.75% points in 14 months, the average mortgage in New South Wales for an established house was $ 355,000. This increase increased monthly payments by approximately $ 411.

Currently, the average mortgage in NSW is around $ 785,000, so with the same 1.75% increase, payments would increase by $ 860 per month.

This is a complicated proposal when raising rates – small movements will have a big impact and will also increase the risk that the RBA will raise them too much.

wages

If the cost of living was a major economic problem of the campaign, wages were not left behind. This government is facing a huge problem, because the recent intervention in real wages is such that we have gone back almost ten years.

This means that even if this government were able to oversee real wage growth at the rate it achieved during the mining boom, we will not return to pre-pandemic levels until 2027. Conversely, if the rate is similar from 2013, we will win no return. there until the next decade:

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All this awaits us in a very difficult period.

This will require strong economic governance from both the government and the RBA and strong communication to explain to the public what is happening.

Throw in the usual concerns, such as poverty, housing and the availability of rents, and the government is facing hard times, with little opportunity to stop and breathe.

Greg Jericho is a Guardian columnist and political director at the Center for Future Work



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