Australia: unemployment rises

The Australian economy has underlying problems as much of the non-resource sector stagnates.

Despite a growth resurgence over the past quarter the wider non mining economy is shedding people. The BBC reports today that "joblessness jumped to 5.3% from 5.1% in July, according to the country's statistical bureau. The Australian dollar fell half a cent against the US dollar after the figures were released."

No wonder PM Julia Gillard sped back to Canberra as soon as she could after the Pacific Forum closed in Auckland. There's even more trouble brewing in the "Lucky" country.

Kick-starting the service sector must be the main priority for the Federal government. "Australia's economy is dominated by its services sector, yet it is the agricultural and mining sectors that account for the bulk of Australia's exports" notes the US Department of State. 

Hence the two-speed economy referred to by Heather Ridout, CEO of Australian Industry Group, an employers organisation. According to the BBC she said that "Some sectors are booming while others, which are very interest rate-sensitive and sensitive to a high dollar, are really doing it tough. The mining industry employs about 150,000 on a good day, while those supplying it add another 300,000 or 400,000." 

Significantly, (mining and agricultural) exports to Asia now account for 60% of the overall total. As a result the Aussie dollar has boomed of late.  The BBC notes, "once derided as the Pacific Peso, the Australian dollar has also been at historic highs against the US dollar, which is seen as totemic of the country's economic strength and resilience.

But recession has hit the "country's shopping malls, factories and tourist resorts" says the BBC. "Those parts of the economy are witnessing a spending strike from cautious consumers, low business confidence and a reduction in visitor numbers" the broadcaster continues.

Tell that to Kiwis boarding planes for Australia at persistently high levels. Maybe Canterbury's quake problems have bolstered flight numbers, or maybe they're strong ambitious types on benefitting from the mining boom in Western Australia, but others venturing across the Tasman must fear their jobs may not be as secure as they might be at home in Aotearoa. As Australians try to pay off record debt levels and save as fast as they can, they are consuming and spending less. And unemployment is rising relentlessly.

The Australian Dollar remains high against most currencies yet dipped today as its New Zealand counterpart rose and the link between the two Trans-Tasman currencies widened. The Kiwi Dollar bought 73 Aussie cents in early March but now buys 79. Will the gap widen further?  And why would Kiwis continue to migrate given such exchange rate and employment uncertainties?

The reason is hope. Australian personal, recreational, finance & insurance and communications sectors all improved in August, noted International Business Times. Yet there are contradictions, as "six (other) segments were still stuck in contractionary territory as they continued to struggle for traction under the triple headwinds of a record high Australian dollar, and a cautious and timid consumer saving madly and refusing to open the purse strings, especially in retail areas" Commonwealth Bank Senior Economist, John Peters told IBT.

Julia Gillard certainly has her work cut out to stimulate domestic demand, re-instate local market confidence and improve her Labour Party's poll ratings.

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