Layoffs by steelmakers don’t mean the end of jobs growth in Australia, analysts say - but that doesn’t mean there won’t be plenty of pain as the economy readjusts to the strong dollar.
BlueScope Steel confirmed this morning that it would scrap 1000 jobs. Its announcement comes a week after fellow steel producer OneSteel flagged 400 positions would be axed, and warned of more job losses to come. Both steelmakers blamed the strong dollar - which has been over parity with the US dollar since March - and weak demand for the cuts.
'‘This is the nature of the structural shift that is happening in the Australian economy now,’’ said HSBC chief economist Paul Bloxham. ‘‘The high level of commodity prices is boosting the exchange rate lately meaning we are getting the structural shift. With commodity prices at the high levels they are, it motivates labour and capital to shift towards the mining industry.’’
Mr Bloxham said manufacturing, tourism and education would suffer as more investment - and jobs - flowed towards mining and that would mean pain for those industries.
Unions acknowledged the challenges for the manufacturing industry created by the strong dollar, which has contributed to lowering competitiveness at a time when steel production has boomed in Asia.
"We've got to face the reality of the manufacturing crisis that's before us," said Australian Workers' Union national secretary Paul Howes, but he added: "We can't accept job losses as the norm and we can't rely on imported goods in our strategic sectors."
The unemployment rate posted a surprise increase to 5.1 per cent in July, from 4.9 per cent in June. Forward-looking gauges of jobs growth have also weakened in recent months. The Department of Education, Employment and Workplace Relations' internet vacancy index sank 0.8 per cent in July.
The index, which comprises such indicators as positions on job websites Seek and MyCareer, posted its first contraction since June 2009, when the financial crisis weighed on activity and hiring.
The layoffs in the steel sector follow the food-processing company SPC, which cut 150 jobs in Victoria this month. In May, Heinz cut 340 jobs in Victoria and Queensland, shifting production to New Zealand because of the strong dollar.
The retail sector has not been spared either, with David Jones and Myer tipping weaker profits to come, as consumers shop online, often taking advantage of the Aussie dollar’s strength to purchase from overseas outlets.
Mr Bloxham said that although this meant pain for Australian industries, he didn’t anticipate a spike in the unemployment rate in coming months, as hiring remains strong in the mining and resources industries.
Nomura International chief economist Stephen Roberts agreed.
“We have got jobs being created in large numbers but not necessarily in the companies losing employees at the moment,’’ said Mr Roberts. Nonetheless, Australia overall can still has employment growth.
The Reserve Bank, in its quarterly statement on monetary policy, released this month, said. ‘‘The unemployment rate is expected to remain at around 5 per cent for some time, before declining a little towards the end of the forecast period.’’
Mr Roberts said that despite the recent rise in the jobless rate he expects it to stabilise in the low 5 per cent level before coming down again in 2012, driven by the mining investment boom.
czappone@fairfax.com.au
BlueScope Steel confirmed this morning that it would scrap 1000 jobs. Its announcement comes a week after fellow steel producer OneSteel flagged 400 positions would be axed, and warned of more job losses to come. Both steelmakers blamed the strong dollar - which has been over parity with the US dollar since March - and weak demand for the cuts.
'‘This is the nature of the structural shift that is happening in the Australian economy now,’’ said HSBC chief economist Paul Bloxham. ‘‘The high level of commodity prices is boosting the exchange rate lately meaning we are getting the structural shift. With commodity prices at the high levels they are, it motivates labour and capital to shift towards the mining industry.’’
Unions acknowledged the challenges for the manufacturing industry created by the strong dollar, which has contributed to lowering competitiveness at a time when steel production has boomed in Asia.
"We've got to face the reality of the manufacturing crisis that's before us," said Australian Workers' Union national secretary Paul Howes, but he added: "We can't accept job losses as the norm and we can't rely on imported goods in our strategic sectors."
The unemployment rate posted a surprise increase to 5.1 per cent in July, from 4.9 per cent in June. Forward-looking gauges of jobs growth have also weakened in recent months. The Department of Education, Employment and Workplace Relations' internet vacancy index sank 0.8 per cent in July.
The index, which comprises such indicators as positions on job websites Seek and MyCareer, posted its first contraction since June 2009, when the financial crisis weighed on activity and hiring.
The layoffs in the steel sector follow the food-processing company SPC, which cut 150 jobs in Victoria this month. In May, Heinz cut 340 jobs in Victoria and Queensland, shifting production to New Zealand because of the strong dollar.
The retail sector has not been spared either, with David Jones and Myer tipping weaker profits to come, as consumers shop online, often taking advantage of the Aussie dollar’s strength to purchase from overseas outlets.
Mr Bloxham said that although this meant pain for Australian industries, he didn’t anticipate a spike in the unemployment rate in coming months, as hiring remains strong in the mining and resources industries.
Nomura International chief economist Stephen Roberts agreed.
“We have got jobs being created in large numbers but not necessarily in the companies losing employees at the moment,’’ said Mr Roberts. Nonetheless, Australia overall can still has employment growth.
The Reserve Bank, in its quarterly statement on monetary policy, released this month, said. ‘‘The unemployment rate is expected to remain at around 5 per cent for some time, before declining a little towards the end of the forecast period.’’
Mr Roberts said that despite the recent rise in the jobless rate he expects it to stabilise in the low 5 per cent level before coming down again in 2012, driven by the mining investment boom.
czappone@fairfax.com.au
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