Focus on job creation

What do Christine Lagarde, Barack Obama and Julia Gillard have in common? All agree that the US economy has managed a major turnaround and will grow at nearly 2% this year. All agree that the developed nations have to provide international funds to hold the line against sovereign defaults. More importantly, they all agree that small and medium business capacity to create new jobs is the key to their success this year.

Christine Lagarde, the IMF managing director, said earlier this week that Europe needed to strengthen its bailout funds, deepen its fiscal ties and grow faster. Banks also needed to boost their capital to restore confidence, she said. “The worst can definitely be avoided, and the recovery can be put back on track. These measures can be taken, need to be taken, and need to be taken urgently.”

President Barack Obama delivered his annual State of the Union Address on Tuesday night (read a full transcript here), focusing primarily on how he wants to help the American middle class and bring outsourced jobs back to the USA. He said: “In the last 22 months, businesses have created more than three million jobs. Last year, they created the most jobs since 2005. American manufacturers are hiring again, creating jobs for the first time since the late 1990s.
Obama’s message can be summed up in his statement: “This country needs an all-out, all-of-the-above strategy that develops every available source of American energy – a strategy that’s cleaner, cheaper, and full of new jobs.

“The development of natural gas will create jobs and power trucks and factories that are cleaner and cheaper, proving that we don’t have to choose between our environment and our economy.”

Obama said in Iowa recently: “There are jobs to be had. It’s an economy built on the skills of American workers – getting people the education and the training they need so they’re prepared for the jobs of today, and they’re ready to compete for the jobs of tomorrow.”

Prime Minister Gillard is pushing for key bodies including the IMF, International Labour Organisation, World Trade Organisation and Organisation for Economic Cooperation and Development (OECD) to work together to create jobs. Julia argues that an increase of IMF member country SDR quotas, which are managed by the fund, will ensure it has the resources available to maintain stability and support recovery in the global economy and buffer troubled European economies.

The common platform is a recognition that the central issue for all governments is not the level of debt, the return to surplus or short-term stimulus measures. The key is the rate of new job creation and the removal of disincentives for job creation by smart companies.
In Australia the development of natural gas and clean energy will be at the centre of the government’s re-election strategies but could well lead to a three-speed economy without a central commitment to job creation.

There still plenty of room for gloom and doom merchants to try to talk down the nation’s prospects in the hope that a by-election can put Joe Hockey and Andrew Robb in charge of further deficit reduction, cuts to jobs in the finance and auto industries balanced by Abbott’s subsidies to parents willing to have one for the country.
The reality is that the year will be a steady path of growth following the pattern that is being set by investors who can see beyond the next few months.

There is also plenty of room for optimism and smart business development in our region which will continue to grow, compete with us in education and job creation – provided that we get over the desire to be just a quarry and a farm.
Hopefully the year will see the focus on job creation lead to a review of barriers to growth such as payroll taxes and banks sitting on their hands rather than lending a hand.