Trouble in paradise (updated)

That’s the headline for my latest Crikey article, on Queensland Treasurer Tim Nicholls’ lame excuses for the rise in unemployment that inevitably followed his government’s decision to sack around 14 000 people. I’m reposting it over the fold

Update I’ve updated to take account of the fact that only 8000 of the promised 14000 sackings took place in 2012.

Reading Queensland Treasurer Tim Nicholls’ attempts to explain away the latest unemployment figures, showing Queensland pulling up the rate for the country as a whole, the question that springs immediately to mind is: Why bother?  Wouldn’t he be better off with some Thatcherite “No pain, no gain” rhetoric, promising that the cuts his government has implemented will yield payoffs for all Queenslanders in the long run.

Sacking 14 000 people in a state with 2 million or so employed workers will raise the unemployment rate by around 0.7 per cent. So far, the government has sacked about 8000 people, corresponding to a 0.4 per cent increase in unemployment. The rest of the increase can be accounted for by ‘second-round’ . The nurses, social workers and firefighters his government has sacked have less money to spend on goods and services of all kinds. The tens of thousands still threatened with the sack but would also be looking harder at discretionary spending.

Of course, as Nicholls points out, other factors are at work. The mining boom has slowed a bit and commodity prices have come down from their recent peaks. But that only points out the dubious timing of these massive cuts. Under boom conditions, public sector workers would have more easily found new jobs.

Nicholls also tries to blame international events such as uncertainty over the US ‘fiscal cliff’ in the lead up to the New Year. Leaving aside the question of whether anyone in Queensland, beyond a handful of political junkies like me, paid attention to these tiresome theatrics, any effects would be felt equally throughout the Australian economy. Moreover, the Reserve Bank, which does pay attention to such things, cut interest rates in part to offset the effects of global uncertainty, of which the fiscal cliff was a small part. Assuming the RBA got the call right, there should be no net effect here.

There are some policies that might have been expected to have a more positive effect. Just a couple of days ago, Nicholls issued a press release trumpeting the fact that, despite its allegedly dire fiscal circumstances, the Newman government has raised the threshold for payroll tax, which was already the highest in Australia. Sadly, it appears that the medium-sized businesses benefitting from this move (the beneficiaries are firms with payrolls between $1 million and $2 million – the core supporters of the LNP government) have pocketed the cash, but have not moved to hire new staff.

Still, Nicholls looks insightful compared to Campbell Newman who is quoted as saying that Employment Minister Kate Ellis’ statements simply reflect the fact that Labor wants to win seats in Queensland. Well, yes. Newman won his landslide victory almost by default. He apparently finds it startling that, when one side of politics makes a mess of things, the other side tries to take advantage.

It’s hard to recall a newly-elected government that has lost support as quickly and completely as that of Campbell Newman, Jeff Seeney and Tim Nicholls. Rather than trying to blame the messenger, perhaps they should pay some attention to the message they are being sent, in both economic data and opinion polls.

26 thoughts on “Trouble in paradise (updated)

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