The NSW economy has remained robust over the years of the pandemic and its aftermath. It has a critical mass that is the envy of other states. Continued high house prices,vaulting rents and low unemployment may be positive signs for some but,despite recent pay rises,most of the gains have been too one-sided and now consumers are cutting spending as they watch the value of their dollars shrink. Employers are planning to cut staff in response.
Nearly a quarter of NSW businesses across all major industries and regions plan to shed workers over the next three months as high interest rates take a toll on consumer spending,sapping the demand for labour. Unemployment in NSW has been at historic lows for much of this year despite 12 interest rate rises since May 2022,but there are indicators that labour market resilience too is beginning to fade. After falling to 2.9 per cent in June,the NSW unemployment rate jumped to 3.3 per cent in July. The state lost 25,000 jobs in the month,nearly 18,000 of them full-time.
TheHerald’s Matt Wade,ranging from sole traders to large organisations with some 78,000 workers,has found 23 per cent planned to reduce staff in the coming quarter while 62 per cent expected to keep the same headcount and 15 per cent planned to hire more workers.
The survey by Business NSW,the state’s peak business lobby group,found sentiment in some major sectors – including construction,manufacturing and retail – was less pessimistic than earlier this year. Others,such as small businesses in the CBD,were experiencing difficulties recruiting or retaining staff as pre-pandemic crowds were yet to return.
Women have been worst affected by the jobs slump,with the number seeking a job rising by 16,300 in July. The female unemployment rate jumped from an unusually low 2.6 per cent in June to 3.4 per cent. Male unemployment in NSW was virtually unchanged in July.
The spectre of the softening labour market looms over the budget. Five years ago,the NSW government had no net debt. That all changed when the effects of the and put pressure on the state’s premium credit ratings. But the Coalition bet on a strong recovery from the pandemic in shaping its monetary policies and,in the dying days of government last March,then-treasurer Matt Kean optimistically predicted the NSW budget would return to surplus in 2024-25.
That won’t happen and Mookhey has not sugar-coated the challenges he faces,warning of “tough choices ahead”. But his budget presents the new government with its only real chance at reform before being curtailed by getting closer to re-election and the inevitable unwillingness to take risks that this brings.
He should think outside the box. To give just one example,the treasurer could take note of proposals by Housing Now,an alliance of big business,unions and university heads which launched on Monday to advocate radical solutions to the housing affordability crisis. These include an idea to cut through the planning maze with a design pattern book,bringing together architects and communities to pre-approve a suite of home designs.
Tough choices do not have to always mean battening down the hatches. This first time,it would be better for the treasurer to be bold and creative in getting NSW to weather the headwinds that are beginning to batter the state’s economy and help steer it into a more economically robust future.
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