13 August 2014

Australia confirmed as New Zealand’s poor jobs cousin

Earlier this year I wrote about New Zealand's improved economic performance and how it was putting Australia in the shade.

The official data released since that blog only further highlights the strengthening of New Zealand’s position.

Consider the following comparative data:

Area
New Zealand
Australia*
June 2014 total employment
2.328 million (+3.8%)
11.578 million (-0.7%)
June 2013 total employment
2.242 million (+0.5%)
11.668 million (+1.4%)
June 2012 total employment
2.227 million (+0.6%)
11.500 million (+0.4%)



June 2014 unemployment rate
5.6%
6.0%
June 2013 unemployment rate
6.4%
5.7%
June 2012 unemployment rate
7.0%
5.2%



June 2014 participation rate
68.9%
64.7%

Note 1: *Seasonally adjusted data
Note 2: The percentage figure in brackets refers to the change from the previous year
Note 3: New Zealand releases labour force data every quarter compared to monthly releases in Australia.

The comparison is actually worse for Australia because the July 2014 unemployment rate for Australia has just been released and it shows a jump to 6.4% caused by a slight increase in the labour force participation rate. This level of unemployment is a twelve year high for the Australian economy, a rather unwanted landmark.

The reality is that in the past two years Australia has only increased total employment by 78,000 jobs (0.67%) compared to New Zealand increasing total employment by 101,000 jobs (4.5%). This means that since June 2012 New Zealand has beaten Australia in job creation by a factor of nearly seven.

Australia’s unemployment rate is now (as at July 2014) 1.4 percentage points higher than two years’ ago whereas New Zealand’s unemployment rate is 1.4 percentage points lower than it was two years’ ago.

The other incredible fact to consider is that New Zealand has a much higher labour force participation rate than Australia, even when around 20% of its home-grown workforce is working outside of its shores (predominantly in Australia).

To put the two countries’ labour force participation rates into context consider the following:
  1. If Australia had a labour force participation rate as high as New Zealand’s we would have an additional 800,000 people in the workforce. If we made the simplistic assumption that this massive labour influx would be sufficient to fill every job vacancy (146,000 per month) then unemployment in Australia would still double to around 1.5 million people, equating to an unemployment rate of around 13%.
     
  2. If New Zealand had a labour force participation rate as low as Australia’s then they would have 104,000 fewer people in the workforce. Again, using simplistic assumptions (ie only unemployed people exit the labour market, not employed people) this massive labour drain would be sufficient to reduce New Zealand’s unemployment to around 33,000 people, equating to an unemployment rate of around 1.3%.
These examples show you what an incredible job the small New Zealand economy does to continually produce enough workers to service and grow its economy.

Why have New Zealand done so well while Australia has done so poorly?

Of course there is no simple answer.

Some commentators believe that New Zealand has prospered due to the government’s efforts to unlock competition which has powered growth in the small to medium-sized business community. This has been achieved through simplifying rules, removing tariffs and reducing taxes. It would seem that more and more Kiwis are starting their own business.

Factors that I mentioned in my blog of 6 June include:
  • NZ's growing trade relationship with China (an annual gain of 51% compared to the previous year, and accounted for around 22% of all exports).
  • NZ export growth has been led by a boom in demand for dairy products from Asia. Over the year to March 2014, milk powder, butter and cheese exports advanced 31% to $NZ14.9 billion, with total dairy exports accounting for over 30% of total exports.
  • Housing construction activity has followed higher house prices recorded in recent years (New Zealand is now rated as having the second most over-valued housing in the world) and is growing strongly, while private consumption and business/public investment are also slated to support positive economic growth over the medium term.
Statistics New Zealand reported that of the 3.8% annual growth in employment, 2.3 percentage points of jobs growth came from existing businesses. This leaves 1.5% of growth (or approximately 40,000 jobs) coming from new businesses, that is locals starting their own business and foreign-owned companies setting up shop in New Zealand. This is phenomenal growth.

Only two years ago I wrote about the record numbers of New Zealanders arriving in Australia with long term plans to settle in Australia.

The figures for the most recent financial year (2013/14) have not been released yet but for the 2012/13 year there was a decrease of 13.7 per cent on the previous year of New Zealand citizens coming to Australia as permanent and long-term arrivals.

Twinned with this was the permanent departures from Australia of New Zealand citizens, increasing in 2012/13 to 10,875 (up 19.5 per cent from 2011/12).

Overall the net permanent and long-term increase of New Zealand citizens in Australia during 2012/13 decreased 20.3 per cent, compared to the previous year.

I suspect when the 2013/14 financial year figures are released they will show that the trends are continuing in New Zealand’s favour.

No wonder the RCSA International Conference (which is being held in Queenstown) in two weeks’ time is sold out; it must be all those cashed-up Kiwi recruiters treating themselves after a productive year.

Thankfully the NSW Waratahs won the Super Rugby title so we Aussies have at least some small, and uncommon, semblance of rugby joy to balance this economic spanking our cousins across the ditch are handing out to us right now.

Well done New Zealand, it looks like the drinks are on you in Queenstown!

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