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Australian Newspaper Wrong
March 13, 2001
Ryan by-election, BHP
March 19, 2001
Australian Newspaper Wrong
March 13, 2001
Ryan by-election, BHP
March 19, 2001

Employment, dollar

Transcript No. 2001/023



Hon. Peter Costello MP


Doorstop Interview

Thursday, 15 March 2001

11.45 am

SUBJECTS: Employment, dollar


Today’s unemployment data show that on a rising participation rate the

unemployment rate moved to 6.9 per cent. However, if you look at the employment data

underlying it, what it shows is, for the third month in a row the number of jobs

increased. The number of jobs, as recorded by the Bureau of Statistics, rose about 32, 000

in December, 11,000 in January and another 2,500 in February, the month which has just

concluded. So what you’re seeing is three months of employment growth and in these

figures, actually, a large jump in the number of full-time jobs in February, around about

33,000. Now these are volatile figures, I always make that point about labor force

figures. But the fact that you have had now three months of growth, December, January and

February, shows that there was continuing jobs growth in the economy, notwithstanding a

weak December GDP figure. That is now being taken up with people coming back in and

looking for work. We’ve got the participation rate jumping and that’s had the

effect of moving that unemployment rate. But the underlying figures in terms of jobs

growth today, are welcome both for three months continuing jobs growth and the number of

full-time jobs that were shown by these figures.


… the growth rate is negligible, there’s obviously not enough jobs for those

people re-entering the labor market?


Well, overall, the jobs growth in the last three months has been in December 32,000,

then in January 11,700 and in February 2,5000. Overall, if you take the three months, the

last three months, there’s been substantive jobs growth. What you’re also seeing

is an increased participation rate – you have to be careful because these bounce around

– is people returning to look for work which is also a good indicator in regards to

employment. And the fact that more people were looking for work, was what actually drove

the rate higher, not the fact that there were less jobs, there are actually more jobs as

recorded by the ….


So do these figures augur well then for the March quarter and augur well for a pick-up

perhaps again in consumer confidence?


Well, the good thing is in relation to the March quarter, you’ve got labor force

figures for January and February, two-thirds of the March quarter, and those two thirds

that are now in, have actually shown increases in employment. So, two thirds of the way

into the March quarter you have to say that employment is making a contribution to growth,

yes it is.


From 32, down to 11, now down to 2500 new jobs in February, it shows a trend that it is

slowing. Does that concern you?


Well, actually, it is 32, and those 32 remain, and 11 on top of the 32…


The additional 32 of the 11…(inaudible)…the rate that increases, decreases.


But, the fact is it’s increasing. That is the point I am making. It increases 32,

then the next month it increases another 11 and the next month it increases another 2.5.

Now, these are volatile statistics I have always said this about the labor force. You can

get a, see-saw in figures, they can go up, they can come down. But, what I think is good

about the figures today is that for 3 months in a row there have been increases. And that

is a good trend.


…8% unemployment by the end of the year?


Look the unemployment rate today at 6.9 per cent, and as I said earlier it see-saws

around, but below 7 per cent, is the lowest unemployment that we’ve had in a decade.




Don’t forget this, when the Government came to office, compared to when the

Government came to office, there are nearly 800,000 Australians who have jobs today who

didn’t have them when this Government came to office. There are nearly 800,000 more

people in work than there was back in March of 1996. So I think that’s actually

something that we should recognise as a good thing.


It is a lagging indicator though Treasurer, are you concerned that the slowing economy

will see jobs growth tail-off in coming months?


Well, this indicator actually shows that there was good jobs growth continuing right up

until the most recent statistics, which are as recent ago as what, three weeks ago? And

what’s more, that people were actually returning to look for work. The fact that the

participation rate went up, I keep making this caveat, these figures bounce around a lot,

but the fact that it went up, it certainly didn’t go down, actually showed that there

was confidence in people going back and looking for work. And that’s a good sign. The

fact that you had three monthly increases over the last three months, two-thirds of this

quarter, is also a good sign and it indicates that there’s jobs growth going on out

in the economy.


On the dollar, the Prime Minister’s made the point today that the fundamentals of

the Australian economy don’t justify a dollar as weak as it is at the present time.

Do you have a view about what level of the dollar is justified by the Australian

economy’s fundamentals?


Well when you take into account these fundamentals, today’s labor force, a Budget

which has been paying off debt – we have now reduced Government debt by $50 billion – so

that we have one of the lowest debt to GDP ratios in the world, we have now low inflation,

and we have low interest rates. When you put all of those things together, the Australian

economy, and I should add to that also incidentally the current account deficit, which by

Australian standards, is very low. In the last quarter the current account deficit was 3.2

per cent. So when you put together current account deficit which has improved

significantly, a Budget position which is strengthened immeasurably, a debt to GDP ratio

which is one of the lowest in the world, low inflation, low interest rates and as

today’s figures show, continuing jobs growth, that adds to an economy which has got

considerable strength in it. And the Prime Minister I think was making the point that when

you look at all of those indicators there is considerable strength in the Australian



Why aren’t the financial markets believing the good news story you’re



Well, financial markets today are extremely volatile, and the volatility is increasing,

and it’s like the movement from the fax to email. The time spans are much shorter

than they have ever been before and the volatility, therefore, is much greater and the

flow of private capital has increased in a way which people would not have imagined in the

last 4 or 5 years. What you saw on markets overnight, is, you saw volatility across all

currencies, and a lot of money obviously seeking a safe haven in the United States. And

when we had a strong US economy, there was a lot of money sought safe haven in the United

States. Now that views of the world economy have changed and people are looking at a

weaker global economy, it seems they are also looking for a safe haven in the United

States. But, the people that are dealing in the currencies are being affected by a whole

range of factors, of which increased speed and telecommunications and capital flows,

contribute to volatility. But in the Australian economy…


But doesn’t that just mean they can do it faster?


They can do it faster…


But they are still doing it…


…they can do it larger, and they can be influenced in seconds, in a way which

wasn’t the case previously.


But Treasurer isn’t it the point that they’re doing it…


…and as a consequence of that, the volatility is greater.


Isn’t the point…


And it is going to be volatility in all currencies. But, the point I am making is, when

you are running a real economy, the important thing is what is happening in the real

economy. And the important things are: where your interest rates are, where your inflation

is, where your employment is going, where your current account is going, so that you make

sure that in your real economy, the thing that actually affects peoples’ lives, you

make sure that you are making the right settings.


(inaudible) it’s not troubling that the volatility in the Aussie dollar is all one

way? It’s not troubling you that the volatility has been consistently marking down

the Aussie dollar?


Well, I think volatility has been affecting the $A dollar and it has been consistently

marking up the US dollar.




That is the other thing that is occurring. Now, I think that if you look at the

fundamentals of the Australian economy the exchange rate is not reflecting fundamentals. I

think that is a point that most people that are trading in the markets recognise. But, the

fact is, unless you want to run a pegged exchange rate, and there are countries that do do

that, but not, generally speaking, western industrialised democracies. If you want to do

that you can try and peg your currency…


But Treasurer…(inaudible)


It is not our policy to peg the currency. As far as I am aware it is not the

Opposition’s policy.


…you’re saying the Government’s policies are basically set right, and it

is a question of us just riding out this instability?


Well, there is enormous volatility in world exchange markets which are principally

today being affected by a changed belief as to world growth prospects. In particular, the

prospects in the US economy and in Japan. There is nothing that Australia can do about the

situation in Japan, which has been dragging along now for nearly 4 or 5 years and has had

rescue package after rescue package. There is nothing that Australia can do in relation to

the United States. Whilst you have the two largest economies in the world experiencing

changes and conditions, you will have volatility in the exchange markets. In the

Government’s point of view, the most important thing that the Government can and

should do, is concentrate on making sure that it gets its economic settings right. That it

gets its economic settings right in relation to interest rates, in relation to inflation,

in relation to the current account and today you have seen good news in relation to



(inaudible)…shock to inflation and confidence which could overwhelm the benefit

that you would like to get from the export sector which occurred in the Asian crisis?


Well, this is the second great period of volatility that we have lived through. The

first was the Asian financial crisis. During the Asian financial crisis, as the Yen

dramatically depreciated, and the Australian dollar followed it, it was thought that that

would have an affect in inflation in Australia and it didn’t. And it didn’t.

During this period of instability, as the Australian dollar has gone down, I think that

you will see, because the Australian economy is so competitive at the moment, that this

will not prove to be a problem in inflation. We have already had experience of this last

year and inflation was not a problem. In fact, inflation was extremely low. I remember

when the December CPI came out, I said it was exceptionally low. So, the evidence

of the Asian financial crisis, and the evidence of this year, leads me to believe that

with an economy in as competitive state as this one is now, that you are not going to see

that feeding into inflation.


(inaudible) are the margins further squeezing investment and also prove a shock to



Well, you have got to remember this, that an exchange rate decline is actually

expansionary rate for an economy. You have got to remember that. It works, by one,

boosting your exports, and secondly, your import competing sector becomes much more

productive. So, if you are just looking at exchange rate factors on their own, exchange

rate factors have the same effect, really, as a loosening of monetary policy. They are

actually expansionary.


Treasurer, are domestic policies…


I’ll take this last one.


Are domestic policy settings right at the present time?


Yes, domestic policy settings are directed at the following: keeping low inflation,

ensuring that interest rates are low, both for business and for home buyers, improving our

current account, particularly by improving the export sector, and by ensuring that we can

adequately fund the social services and the social security that Australians want. And

that is what we are addressing our Budgetary policy at.

Thank you.