Yesterday the unemployment rate dropped. Cause for cheer? No, according to the expert economists.
Westpac senior economist Anthony Thompson told News Ltd it was just “statistical noise” and that “smoothing through the noise you’ll see the labour market has not turned… every other lead indicator is pointing to a decline well into 2010.”
Oh dear.
The latest number from the Australian Bureau of Statistics (ABS) puts the ‘seasonally adjusted’ rate at 5.4%, down from 5.7% in March. And the ‘trend’ rate is at 5.5%, which is up from 5.4% in March.
As you can see from the ABS chart below, one is point UP, the other is pointing DOWN…
Which do you believe? According to Westpac’s Thompson, the ‘trend’ rate is pointing in the right direction. We tend to agree. And of course, just like an other indicator or index, it rarely moves in a consistently straight line.
So, it’s a rare occasion when your editor agrees with the thinking of mainstream economists. You would think therefore, with an ugly unemployment outlook the government would be doing its best to keep out of the way and not impose extra burdens on business.
Less financial burdens such as new regulations or new taxes mean a business can either retain more staff or hire new ones.
Unfortunately it seems as though the government has only got it half right. It’s only putting a little burden on business, and, thankful that they don’t have to pick up the full tab, business is quite happy to go along with it.
Of course someone’s going to pay for it, and that’s the taxpayer.
Pay for what? Paid maternity leave. And businesses are reasonably happy because they’ll only get slugged for the superannuation contributions – a small price to pay for dodging the bigger bullet.
At a time when government’s over floundering globally over massive increases in social welfare costs, you might think they’d try and fix the existing ones before dumping another multi-billion dollar liability on the taxpayer.
But no, this is too important, and besides it’s a stimulus because the parents will go out and spend the money. In fact, the total cost to taxpayers is estimated at $450 million per annum.
And note that according to the Productivity Commission it will be an “additional” cost to the government budget.
Those arguing in favour of the plan would say “Why not? They deserve it.” It’s quite simple. If the income tax levels weren’t so high to begin with then such forms of welfare programmes wouldn’t be necessary. It’s a further example of absolving everyone from personal responsibility.
Imagine if the average person didn’t have to pay about a quarter of their salary in federal and state taxes. Plus whatever they pay in consumption taxes like the GST. They might be able to plan in advance and tuck some money away.
Instead, individuals are taxed to the eyeballs – possibly by even more after next week’s budget – and then find the government having to borrow extra money from the capital markets because it still doesn’t have enough.
The website for the Productivity Commission states:
“As its name implies, the Commission’s focus is on ways of achieving a more productive economy – the key to higher living standards. As an advisory body, its influence depends on the power of its arguments and the efficacy of its public processes.”
We aren’t quite sure how increasing the tax revenue by $450 million per year adds to productivity. At best it makes no difference to productivity because the money is being swilled around and given to someone else to save or spend.
At worst, it actually decreases productivity because government will soak up millions of dollars that would otherwise have been used productively elsewhere in the economy.
A quick look at the Commissioners and Associate Commissioners shows the majority of them are career bureaucrats and academics. Do they really have a clue on how to make an economy more productive?
Strangely enough, we don’t think so.
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