Australia’s employment culture is saving jobs: Kohler

Take yesterday’s employment numbers from the ABS with a grain of salt, but don’t ignore them.

The bureau’s survey sample is 30,000, which is smaller than it used to be but still much bigger than any market research survey on which businesses make life-changing decisions.

It seems clear that the Australian labour market is stronger than anyone thought, and much stronger than any other western country.

Yes, job advertisements have dried up, so no one’s hiring, and when the NAB survey team contacts businesses every month they moan and grizzle about how they are definitely going to have to sack some people very soon. And there have also been some high profile mass redundancies.

But the truth is that retrenchments are actually very limited at this stage; businesses are hanging on to as many staff as possible, for as long as possible.

So credit where it’s due. Assuming the ABS did not simply make a mistake as some are claiming, to be reversed next month (very unlikely), it is a triumph for successive Australian governments (Labor and Coalition) and their industrial relations reforms over two decades. It is also a triumph for the great employment culture that has developed in Australian companies with the deregulation of IR.

This is the first real test of Australia’s IR reforms, and I think we can now conclude that the harsher environment for workers and staff that unions warned about has not eventuated.

Instead, it is less harsh – companies are very reluctant to get rid of people and are doing almost anything to avoid it – enforced holidays, nine-day fortnights, cutting out overtime and so on.

As Rory Robertson of Macquarie Research showed in a chart yesterday, which I presented on the ABC news last night, at this point in the 1991 recession, employment had fallen 4%. This time it has fallen 2%, even though the global economic shock has been much greater.

Incomes are declining as a result of that, it’s true, but jobs are being held.

What’s more, national house prices are not falling – in part, no doubt, because of the strength in employment. There have been three sets of data on property values in the March quarter – RP Data-Rismark, APM and the ABS. The first two have reported small gains in values in the quarter while the ABS has reported a big 2.2% decline.

I expect the Reserve Bank, in its monetary policy statement later today, to go with the RP Data-Rismark and APM figures, and conclude that house prices are not falling. (Mind you, if the ABS has got house prices wrong, perhaps it has also got employment wrong).

Anyway, if China really does escape the downturn as it’s beginning to appear, then Australia could actually avoid the “great recession” that has already gripped Europe, America and Japan.

And meanwhile evidence continues to build that the global economy as a whole is stabilising. As Robert Gottliebsen commented this week, fiscal and monetary rescue efforts have worked better than anyone could have imagined.

The global banking system is still in a mess, notwithstanding today’s stress test results to be announced in the US, but the fact is there has not been a wholesale flight from paper money.

China is stockpiling metals to some extent as an alternative to US dollars, but gold is behaving like a commodity not an alternative currency as it has traditionally done. The gold price is now exactly where it was a year ago.

I’ve been pretty bearish; concerned about complacency in Australia about the impact of the international squeeze on credit.

But I’m happy to embrace being wrong because a wonderful employment culture has developed in Australian business as a result of the industrial reforms of the past 20 years.

This article first appeared on Business Spectator.