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With Australias largest state economy rapidly sliding into near recession how long before the rest of the country (apart from WA) is affected?

Jobs drop as economy gets shakes By John Garnaut
May 12, 2006

ALMOST 20,000 people joined the state's jobless queues last month, and some Sydney businesses say they have never seen the economy so subdued.

The number of NSW workers has been sliding for a year and slipped a further 9000 in April. The state unemployment rate is now the highest of any mainland state, jumping from 5.1 per cent to 5.6 per cent.

Restaurateurs are laying off staff because Sydney's property investing nouveaux riches are eating at home.

"I've never seen the market like this before," said Peter Conistis, who this week added a budget menu to his city restaurant. "Everyone is becoming a bit more cautious about where their money is going these days."

Clayton Wright, who supplies meat to fine restaurants and runs a butcher's shop, said property investors were forsaking the high life to keep their banks at bay.

"We're seeing a major shift as people who were dining out in restaurants are now going to their butchers or their local shops and entertaining at home," he said.

In Western Australia, where the booming mining sector accounts for more than a fifth of state income, the jobless rate

fell to just 3.9 per cent last month, the lowest since records began in 1978. While NSW is forecasting a $533 million deficit next year, Western Australia yesterday forecast a $2 billion surplus, worth about 45 per cent of state tax revenue..

The national jobless rate rose from 5 to 5.1 per cent last month, NSW dragging up the average. Job losses in NSW offset rises elsewhere, leaving just 117,000 new jobs across the country for the year to April in trend terms.

"It's the smallest number of new jobs in any 12-month period since 2001," said Anthony Thompson, a Westpac economist. About 70,000 were full time and 46,000 part time. Across the country 23,000 full-time jobs were added last month, but 26,000 part-time jobs were lost.

The Reserve Bank faces a dilemma in setting interest rates to suit both NSW and the booming mining states. Mr Wright said last week's interest rate rise had "really put a knife into things". "This week was probably the weakest we've had for years, and we're not on our own."

The Australian Bureau of Statistics jobs survey was taken before the rate increase, and economists now fear that the Sydney jobs market could deteriorate further.

Ron Woods, chief economist at Challenger Financial Group, said the state economy had recently slipped markedly. "There's a lot of anecdotes around in the past few weeks that say things have just got cold in NSW. Traffic flows have dissipated in the morning. Restaurants are going down market. Retailers are nervous."

The Treasury secretary, Ken Henry, will examine the growing divergence between sluggish south-eastern Australia and the booming west and north in a speech about the commodities boom on Tuesday.

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Ha Ha, they have just tabled a huge budget surplus, extra spending and tax cuts that Labor are struggling to find anything to complain about. Read the opinion sections of the papers to see what experienced political commentators think.

Straws and Clutching comes to mind with some diehard left wingers at the moment.

1,965 Posts
The end of Iemma more likely!
High property taxes, high pay roll taxes and lack of investment really damages a states credibility - however at least Iemma understands the consequences of inaction.
I still dont think its anything of a concern - its nothing like Victoria in the 90's.

This may actually strengthen the Liberal party - NSW residents can easily see how well QLD and Western Australia are doing - while it is becoming very common that VIC is growing a little faster than NSW (something that many thought could never happen) - Iemma will have a very big fight on his hands

And lets not forget - NSW is not in recession - it had one quarter of negative economic growth - which bounced back up in the previous quarter - a lot better than VIC's massive recession in the 90's and SA continually disappointment
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