Yesterday the Government announced its latest fiscal response to the rapidly worsening economic situation. They will spend $42 billion (mostly in 2009 and into 2010 to shore up aggregate demand. They estimate this will underwrite 90,000 jobs in the economy. That is not new jobs but existing jobs. They also estimate that the unemployment rate will rise to 7 per cent over the coming year which is around 300,000 people extra who will be without work. That will take unemployment towards 850,000 and underemployment will certainly rise in lock-step (already around 600,000) so you see the scale of the deterioration.

However, while I think the package is a step in the right direction, the Government has failed to really target jobs. If the Government had have introduced a Job Guarantee and paid the workers the current national minimum wage (with holiday pay etc) it could have hired 557,000 full-time equivalent workers for around $8.3 billion per year. Where does this figure come from?