Australia’s economy is dangerously reliant on just two states and their property markets right now

Photo: Getty Images
  • The latest jobs figures are out and they show that across the country, only 500 net jobs were created, as full-time work increased at the expense of part-time roles.
  • That will be welcome news to the Reserve Bank of Australia (RBA), which has become increasingly concerned with underemployment — where workers can’t get the hours or the roles they require.
  • Economists are concerned however about the reliance on New South Wales and Victoria when it comes to employment, as both states both look like they might weaken with no one else to pick up the slack.

The Australian economy finds itself in a sticky situation at present, the latest jobs figures show.

They showed just 500 jobs were created across the country in the month of June — just a fraction of the expected 9,000-10,000. In isolation however, that’s not cause for alarm, according to Commonwealth Bank of Australia (CBA) senior economist Gareth Aird, as the creation of more than 21,100 full-time jobs offset the disappearance of around the same number of part-time ones.

“The June employment report was underwhelming, but not surprising given the big lift in employment over May that might have picked up an election impact — i.e. the recruitment of temporary workers by the Australian Electoral Commission to conduct the Federal election held on 18 May,” Aird said in a CBA note on the figures.

That kept the jobless rate steady at 5.2%. Just as significantly, however, the growth in full-time work will help allay a growing concern of economists and the Reserve Bank of Australia (RBA).

“The underemployment rate, which the RBA is increasingly referring to, dipped by a solid 0.4 points to 8.2% — (that’s) good news,” Airth said.

More full-time workers tend to earn more and spend more, helping grow the economy as a result, but it’s in the breakdown of which states are hiring and which aren’t that the picture begins to look less rosy.

New South Wales and Victoria have long been the country’s largest two employers by a long shot but their economies are beginning to slow.

“One of the interesting things about the Australian economy right now is that so much growth is concentrated in New South Wales and Victoria, primarily in Sydney and Melbourne. The other states are doing quite poorly. One of the concerns I have is if the Sydney and Melbourne labour markets slow down, who fills that gap?” Callam Pickering, Asia-Pacific economist for jobs site Indeed, told Business Insider Australia.

“If conditions slow in these states, perhaps due to housing, then the overall labour market picture would deteriorate rather quickly.”

Certainly, a decline in both the Sydney and Melbourne property markets has been apparent. That’s a weight on consumer confidence, leading to more penny pinching by households, at the same time that construction slows.

The latest jobs figures showed some signs, albeit small ones, of that deterioration. In Victoria, the unemployment rate rose to 4.8%, while New South Wales’ remained steady despite the disappearance of more than 17,000 jobs.

Despite mining states enjoying something of a boom spurred on by commodity prices, they’re simply not a good alternative when it comes to doing the heavy lifting.

“The mining sector is doing quite well but it’s not a big employer. The main benefits from the mining sector is that income it generates spills over into other sectors in Western Australia and Queensland. That could help support those markets but the Sydney and Melbourne are so big by comparison that if they start to struggle from a labour standpoint, it’s hard to see how the other states could offset that,” Pickering said.

That leaves the national economy in a quagmire. While unemployment remains steady at 5.2% for now, it’s up sharply from 4.8% just a few months ago.

As construction slows in New South Wales and Victoria, there may be less to stop it rising further, according to AMP Capital chief economist Shane Oliver.

That’s a worry for all Australians, no matter where they live.