December 5, 2014 – 6:43PM
Nicholas Gruen of Lateral Economics Photo: Rodger Cummins
Australians are feeling the effects of a sluggish national economy with new figures revealing a sharp rise in the social and economic cost of unemployment.
The Fairfax-Lateral Economics Wellbeing Index showed the annual well-being cost of unemployment and underemployment surged 14 per cent during the past year to $15 billion – the equivalent of 1 per cent of the economy’s annual output.
The figures will add to jitters about the health of the national economy in a week when the official growth rate slowed to a crawl and the Australian dollar slipped to a four-and-a-half year low of US83.56c. In the past few days a number of prominent economists have forecast the Reserve Bank will soon cut interested rates in a bid to boost the economy. Also the Treasury Secretary Martin Parkinson warned on Wednesday that reforms were urgently needed to stop living standards from falling.
Wellbeing index 2014
The author of the well-being index, Dr Nicholas Gruen, said the true cost of unemployment and underemployment was being underestimated.
“Unemployment – and its milder cousin underemployment – don’t just lower output, they depress people’s wellbeing,” he said.
“Also GDP fails to measure the economic damage caused by the way long-term unemployment depresses future earning potential. The wellbeing index includes those effects.”
The unemployment rate has climbed from 5.7 per cent to 6.2 per cent over the past year and the rate of long-term unemployment is well above its 10-year average. The official measure of underemployment has also deteriorated sharply, reaching its highest level since the late 1970s.
The Wellbeing index – which uses a range of indicators to put a dollar figure on national welfare – highlights costs associated with unemployment not picked up by traditional economic measures such as GDP. This includes the skills lost during long periods out of work and other lasting consequences of unemployment.
The index estimated the well-being cost of unemployment in the year to September was $9.3 billion. The well-being cost of underemployment was $3.8 billion and long-term unemployment was a $2 billion drag. The well-being cost of underemployment surged by 14 per cent in the year.
Dr Gruen warned against “policy fatalism” in the face of rising unemployment.
“We’re tightening fiscal policy but the Reserve Bank has drawn up stumps on easing interest rates,” he said.”We’ve come to accept our own mini-version of other developed countries’ malaise. We’re choosing policy timidity not after rigorously assessing the available options.”
Overall, the well-being index fell 0.7 per cent in the year to September despite a most rise in the September quarter. This contrasts with gross domestic product which rose by 2.7 per cent in that period.
The index showed obesity is taking a growing toll on Australia’s collective welfare. The total well-being cost of obesity reached a record $126.1 billion in the year to September, an increase of 6 per cent. Other major drags on national well-being were untreated mental illness, inequality and overwork.
Source : The Canberra Times