Plenty left behind in a national economy that the Government claims is ‘roaring back’

Today, we have a guest blogger in the guise of Professor Scott Baum from Griffith University who has been one of my regular research colleagues over a long period of time. Today he is continuing his discussions around the uneven regional impacts of job losses since the start of the COVID-19 pandemic. So while I am tied up today it is over to Scott …

Sorry Mr Treasurer, you might think the economy is roaring back, but there are plenty of left behind places that might disagree

The conservative media celebrated the Federal Government’s fiscal statement (AKA the budget) that the Australian Treasurer Josh Frydenberg delivered on May 11, 2021, with typical bluster.

The title of article in the Australian Financial Times article (May 11, 2021) – The economy is ‘roaring back to life’ – was representative of this type of hubris.

The Treasurer promoted the idea of celebration – claiming it was a great win for ‘team Australia’ and surely, we would all be benefitting.


Not so fast Josh.

Firstly, there is some debate as to the level of roar in the county’s economic engine.

The labour market in particular is not roaring back.

More like a splutter than a roar.

Sure, there has been some bounce back in jobs, but as were learned in Bill’s blog post from May 20, 2021- Australian labour market struggling with significant sectoral disparities (May 11, 2021) – “the labour market is definitely not booming … Some sectors are still enduring major job losses”.

Moreover, the latest labour market figures published by the Australian Bureau of Statistics – Labour Force, Australia, April 2021 (released on May 20, 2021) – show the potential fragility of the recovery.

The analysis of the data is covered in the blog post – Australian labour market goes backwards in April (May 20, 2021).

The highlights are:

  • Participation rate decreased to 66.0%.
  • Employment decreased to 13,040,400.
  • Employment to population ratio decreased to 62.3%.
  • Underemployment rate decreased to 7.8%.
  • Monthly hours worked decreased by 13 million hours.
  • Unemployment rate down, participation rate down, employment down, monthly hours worked down. Mixed messages that don’t at all support the roaring economy argument.

This leads us to another point and that is that even in a recovery the rising economic tide will not lift all boats.

There is still plenty of Australian’s who are feeling the pinch.

This applies to individuals and it applies to the communities they live in.

I touched on this in my blog post – Using a regional lens reveals the uneven impact of the COVID employment crash (February 11, 2021).

In that blog post, I considered how the change in employment (measured by the ABS’s Payroll jobs Index) associated with the COVID-19 slowdown has differed between regions (SA3s).

To recap, the methodological details of the index can be found here – Weekly Payroll Jobs Australia Methodology and for context Statistical Area 3 (SA3) represent:

… the functional areas of regional towns and cities with a population in excess of 20,000 or clusters of related suburbs around urban commercial and transport hubs within the major urban areas.

The take home message from that blog post was there were clearly regions or communities that were benefiting from the government’s COVID Jobkeeper package and there were those that were not.

In fact, it was places that might be considered prosperous (low pre-covid unemployment and high incomes) that were benefiting most, while those needing significant support (high pre-covid unemployment and low income) were being left behind. And for many places this was not the first time. A large proportion of these left behind places have historically suffered from below par economic and social outcomes.

The most recent release of the – Weekly Payroll Jobs Australia (May 11, 2021) – allows us to revisit the points I raised in the previous blog in the context of where we are in Australia at the moment and the notion of recovery and left behind places.

The graph below is the average Payroll Jobs index series for the top 10% and bottom 10% of regions according to median household income, together with the series for Australia as a reference.

The series is indexed to the week ending 14th of March 2020, the week in which Australia recorded its 100th confirmed coronavirus case and is up to 24 April 2021.

Each line follows roughly similar trajectories across the period.

The most significant changes are clearly at the beginning of the series, which is the impact of the COVID-19 economic slowdown (or shutdown) when we saw considerable job losses across the board.

The second significant fall is during the period at the end of the series following Christmas and the New Year.

And then there is an apparent dip in jobs towards the end of the series as the government ceased its Jobkeeper program.

The graph clearly shows that low-income regions are being left behind.

With both the high-income and low-income series starting at 100 the high-income regions have, and continue to fare much better than the low-income regions.

Same old story.

Some places do well, while others become part of the social wreckage landscape.

The second graph is similar to the first, except it represents the top and bottom 10% of regions according to the pre-pandemic unemployment rate. Again, the lines represent the average payroll jobs index for the respective groups of regions (higher and lower unemployment) with the index for Australia included as a reference.

Different data, similar outcome.

Places already struggling have been further punished relative to other places.

As with the previous graph both series began at 100 prior to the initial COVID induced drop in employment with the regions with the lowest levels of pre-covid unemployment doing better than those with high pre-covid unemployment.

So, I think the point is clear.

There are plenty of places and people that live in them that would questions the Treasurer’s argument that the economy is roaring back.

And rather than trying to convince us that everything is back on track, the government should be taking a long hard look at what they could be doing better to help communities and regions that are being left behind.

Assuming that economic growth will lift all boats is a fallacy and the government should be ashamed of itself if it still believes this.

By cutting back on it’s COVID-19 economic support measures the government has taken its foot of the accelerator far too early and as with other recessions, the result will be that under some threshold, some communities will not come back as they once were.


I have written about these left behind places in a previous blog post – I vote, I am unemployed and I live in your electorate (March 30, 2021).

It is places like these, with their high levels of accumulated social wreckage that should be a real concern for government and governments should be doing their best to ensure that another opportunity to make a real difference in these places is not wasted.

This month’s fiscal statement was one such opportunity for the government to make a real difference in many of these places, but alas the Australian Treasurer seemed more intent on finding snappy adjectives to try to sell us on the country’s economic performance.

The title of the fiscal statement should have been ‘Team Australia: we are all in this together, except when we are not!’

Bill adds the following

The State of Victoria has now gone into another very strict lockdown after a leakage from quarantine in South Australia has now spread to Victoria and was in danger last week of getting out of control.

In social terms this lockdown is very tough.

In economic terms, it is highly costly.

I support it despite locking me out of my home state and office until the restrictions ease.

We are now 15 months into the pandemic and the Federal government has so far resisted funding dedicated quarantine facilities and have forced the states to host the returned travellers, many of who come back sick with COVID, in hotels, which are clearly not suitable for this purpose.

The Prime Minister claims that the hotel system is 99 per cent or so effective, given that only a few leakages have occurred in the last 15 months (I think the figure is 17) while thousands of returned travellers have been accommodated.

That logic fails in these instances.

It is like saying that we should be happy that only 1 in every 100 aeroplane flights crash with devastating consequences.

It is clear in this instance, that zero leakage from quarantine is the only acceptable standard.

We have a model that has delivered that – the dedicated facilities in the Northern Territory – which are designed quite differently to hotel rooms (they are cabins with no shared airspaces).

Several states have begged the Federal government to build similar facilities in every state but the Government has refused.

The leakages are thus the result of their failures to take the pandemic seriously enough.

Further, we have a hopeless vaccination process and despite claiming the population would be safe by October 2021, only a small percentage of us are vaccinated at present.

The Government failed to procure sufficient vaccines and have failed to induce confidence that the only widely available vaccine (AZ) is safe.

Many people (me included) who are not anti-vaxxers, will not take AZ and want the choice of Pfizer.

The Government is chasing its tail now trying to make up for its hopeless decision-making, which was based on trying to ‘save money’ (back to that) and only get AZ in volume.

But the horse has bolted and the Victorian outbreak is demonstrative of these policy failures.

It is all down to the incompetence and hubris of the Federal government.

That is enough for today!

(c) Copyright 2021 William Mitchell. All Rights Reserved.

This Post Has 5 Comments

  1. Hi Professor Baum. So the Australian government is deficit spending to some extent but probably not enough in the current situation. Do we MMT types worry about a future burden of that current government spending? I’m asking because I said MMT does not and now I am a little worried that maybe I overstepped in a comment on another place.

    Well what I said was in response to this -“In contrast, many MMTers don’t seem to believe that deficits impose a burden [on] future taxpayers.” Which was Scott Sumner not liking being compared to Stephanie Kelton or anything MMT. And I said-

    “This is mostly accurate in my opinion. If all the caveats about the government (such as the USA) being the issuer of a non- convertible currency that borrows only in its own currency are considered. MMT holds that the burden of the spending is borne at the time of the government spending- not at some time in the future. Government spending diverts real resources to government uses whenever government spends. If those resources were not being used, well it’s not a big problem- and it is not a problem in the future for taxpayers. If most resources were already being used optimally, additional government spending is going to both divert from previous uses and risk causing inflation. Both of which could be a problem at the time the spending occurs- not at some point in the future because of a debt burden.”

    But now I’m a bit worried that maybe that isn’t accurate and, as I am loathe to admit to Sumner I might be wrong about something, if I actually am- maybe someone else could go correct me after explaining it to me.

  2. I’m no expert, but IMO your sttement ia 100% correct.
    But, I’m np expert.

  3. Dear Jerry Brown: ‘ If those resources were not being used, well it’s not a big problem- and it is not a problem in the future for taxpayers.’ It seems to me you were not definitive enough. I’d suggest, providing a job at a non-inflationary wage level (inflation being a continuous rise in prices) is always a positive response to a society ill and never a problem unless the job is destructive in some manner eg environmentally destructive. And unless destructive, it can only ever build a better starting point for the future.
    Here in the UK we have the central government reluctantly supporting a London Underground system (critical transport for the capital) that had finances ruined by pandemic drop in passengers, only on the basis that it writes a business case for driverless trains, makes annual cuts and cuts to the pension scheme. The govt isn’t leaving it to the private sector to shed jobs.

  4. Jim Chalmers stated yesterday that the Treasury Secretary has told parliament that around 56,000 JobKeeper recipients lost their jobs after the scheme was cut. He hasn’t provided any direct information as to how Treasury arrived at that figure but there certainly appears to have been a hit to the labour force, how big yet to be determined.

    I think there are forces pulling in opposite directions. On one hand, the inability (probably for the first time since World War 2) of employers to access imported foreign labour, the spending within the domestic economy of tens of billions that would normally leak out overseas (since nobody can leave) and the surge in credit money for the latest housing boom are all working as positive contributors to jobs and growth.

    But I’m sceptical that this will last and it may already be waning.

  5. If the middle class can find jobs then economy is roaring back. If they even lost their jobs in the first place.

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