Last week I asked a couple of times what kind of economic narrative Canberra is going to adopt given talk of a mining “boom” doesn’t make much sense when folks are losing their jobs. Perhaps we now have an answer from Swanny via News:
Federal Treasurer Wayne Swan has conceded that employment growth may not be as strong as forecast in last year’s budget.
But it will still outpace about any other country in the developed world, he adds.
The federal government had predicted the creation of an additional 500,000 jobs during the next couple of years.
“Certainly, we will do less than that,” he told ABC Radio on Monday, adding that that was indicated in November’s mid-year budget review.
Mr Swan said employment growth had slowed “But the outlook for our labour market is still far stronger here than just about any other developed economy”.
“What we have to do is to look at the opportunities that are out there.”
The full interview is available here. So that is it, the government’s post-mining boom economic narrative: ‘bloody pessimists’.
Swan’s rhetoric this morning was chock full of references to our “confidence problem”. By which, presumably, he reckons we aren’t spending enough money. So, implicitly Mr Swan wants us to do one of the following to create more jobs:
- save less and spend more
- borrow and spend more
Do either of these options strike you as economically responsible or even viable? If we take option one, then the banks will need to find more wholesale money as deposits growth falls. This will increase the risks around the banks to the degree that the borrowing will expand. Their funding costs will commensurately rise, as will mortgage rates to that extent.
If we take option two, the outcome is pretty much the same only the RBA rate cycle will reverse even more quickly.
So, do we have a confidence problem? Or, do we have a very sensible shift towards greater savings that is de-risking our banks and leading us through an inevitable adjustment towards more manageable debt levels and lower levels of consumption, as well as a Treasurer that has no idea?
