11 Nov 2013

Doubts about Australian transition from mining boom

7:05 am on 11 November 2013

A surprisingly weak monthly jobs report in Australia has raised doubts about the economy's transition away from the mining boom of recent years.

Radio New Zealand's Sydney correspondent says the economy needs a new engine. The mining boom of the past decade has peaked, but new sources of growth are yet to appear.

That perception was reinforced by the October labour force survey. While unemployment was steady at 5.7%, this was mainly due to fewer people looking for work as workforce participation hit a seven-year low.

In addition: full-time jobs fell by nearly 28,000 - the biggest decline in more than a year. Manufacturing jobs are being lost as the strong currency hits exports and growth in labour income is very weak.

Radio New Zealand's correspondent says this has all served to get markets thinking about the Reserve Bank here cutting interest rates again, or at least pushing out the timetable for an eventual increase.

Car industry woes

The labour force numbers were weakest in the states of Victoria and South Australia, where the car industry is based. And that only looks likely to worsen.

Ford has given notice it will shut its Melbourne Assembly plant in three years. And both General Motors Holden and Toyota are looking for government assurances of more industry assistance to keep them here.

Billions have already been spent propping up carmakers, but Radio New Zealand's correspondent says it would take a brave politician to let them go. It's not just the assembly jobs; it's the jobs in the manufacturing supply chain that service the auto industry.

According to a report prepared for the industry, the loss of the car makers could cause a $21 billion hit to the economy, cutting GDP by 0.6%.