PS prop-up suggested
Analysts say the public sector is propping up employment and the economy.
Consumer and business surveys appear to go against Treasurer Josh Frydenberg and Reserve Bank governor Philip Lowe’s agreement that the economy is solid.
“They sure as hell can do better, and fiscal policy and monetary policy will help,” NAB's chief economist Alan Oster has told the ABC.
“Whether it will turn around the consumer big time, that's a different issue.”
The Westpac-Melbourne Institute consumer survey shows sentiment is down 4.1 per cent in July, suggesting shoppers are pessimistic despite two interest rate cuts over the past two months.
The Commonwealth Bank's June Business Sales Indicator — which measures economy-wide spending — flattened out in June, the weakest monthly growth rate since February 2017.
NAB's quarterly business survey has found conditions are now below average for the first time since 2014.
“That's very unusual,” Mr Oster said.
“If you go back and look at that over the last number of years you'd see that it's only occurred during the GFC, it occurred a little bit around the time of 2000, which was a global recession — although Australia dodged it — and you see it big time in the last Australian recession in the late '80s and early '90s.”
JP Morgan chief economist Sally Auld appears to agree with Mr Oster.
“I think what it does show you is that the underlying resilience of the economy feels pretty soft,” she said.
Eight out of 10 new jobs are being created in the public sector.
“So the quarterly ABS data on employment growth by industry and sector shows that in the past 12 months you've seen 310,000 jobs created in the public sector, while only 54,000 have been created in the private sector,” UBS economist Carlos Cacho said.
“Now that's quite a disconnect given the public sector only represents about 15 per cent of total jobs in Australia.”
NAB's Alan Oster has backed Mr Cacho’s claim.
“People are nervous so they're not really employing people,’ he said.
“Everyone's worried about margins and so, in that sort of environment, the private sector is saying; ‘Well, if I really desperately need to I'll put someone on to do a new job for me, but beyond that I'm going to be very careful not only not to employ anybody new but not to pay them any increase in wages’.”
Minister for Employment, Michaelia Cash, says the experts are using the wrong figures.
“The Government is focused on job creation and these figures show that we are putting in place the right economic framework so that the businesses out there are able to prosper, grow and create more jobs for Australians,” she said.
“Recent claims by economists that most of the employment growth in Australia is in the public sector are based on their calculations from the ABS Labour Force Survey, which the ABS itself has cautioned against using as the correct measure of public service employment.”