On budget night, Wayne Swan, give us a strategy for creating jobs

How will we know whether or not Treasurer Wayne Swan's federal budget is a good one? The popular test used to be pretty simple: deliver jobs for all or face the axe. Even when the old Keynesian-style full-employment formulae no longer worked, people still expected the free market economic reforms to deliver on jobs.

In this pre budget discussion, however, we have heard very little about jobs. Yesterday significant cuts to the public sector were announced, but the big budget question seems to be rather how close to the bone should the government cut?

A likely explanation for the silence on this issue might be the widely held conviction among many senior economists that we are already at full employment – more or less – so there is "no problem".

April's unemployment rate in Australia is currently 5.5% (down slightly from March's 5.6%), and the idea policy might push it back to the 1% or 2% which prevailed for three decades from the 1940s is simply never part of the polite discussion in these circles.

Between the conversational lines, the sense appears to be that in a "modern knowledge economy" there is likely no room for the unintelligent and unskilled; and indeed if they were to be included they would only lower productivity and lift the rate of inflation. But should we be satisfied with employment the way it is, or see in these attitudes a potentially dangerous complacency?

It is completely true that more than two decades of welcome uninterrupted economic growth sees Australia with a current unemployment rate among the lowest in the OECD. But remember these were the economic good times and yet, according to the ABS, there are still 686,900 Australians who want to work but can't get a job, while a further 784,000 Australians are underemployed - they've got a job but want to work more hours.

At the Brotherhood of St Laurence, we see the human consequence of the statistics of those who are locked out of the labour market. At our work and learning centres, purposely located near public housing in Victoria, those who seek tailored help with their job search uniformly express a strong desire to work.

Meanwhile, we face more straitened economic circumstances with Professor Ross Garnaut talking of the need for "shared sacrifice". So, what will happen with employment? Garnaut's view is linked to a widely-held judgement of the policy failure of historic proportions in not capturing the benefits of the mineral boom to contribute to an economic growth strategy. If this is indeed the main economic story then we ought to bring back the "jobs test" as the key to budget success or failure.

In my upcoming book, Inclusive Growth in Australia, co-edited with John Buchanan, we use the concept of "employment portfolios" to reflect on potential employment scenarios in Australia. The concept is a powerful one, if you think that in the post-war period the relative affluence of ordinary Australians resulted from an economic strategy which capitalised on the post-war boom in manufacturing to deliver decent jobs for ordinary Australians.

However the shift from manufacturing into the service economy has not been accompanied by any comparable expansion of good jobs for low and middle income earners. Their living standards have been propped up by welfare and the growth of two-income households, but where is the growth engine for more and better jobs after the boom?

From this perspective, debating budget success or failure primarily on the relative size of deficits seems material for Alice in Wonderland. If our first priority is the welfare of all Australians, then we need to shift our focus to jobs. Show us the strategy for more and better jobs. When we see that then we can truly judge budget success and failure.

Paul Smyth, Professor of Social Policy at the University of Melbourne, University of Melbourne

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