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The worst jobless figures since Malcolm Turnbull deposed Tony Abbott have again highlighted Australia's anaemic economic growth, boosting the chances of another interest rate cut and putting pressure on Treasurer Scott Morrison to protect jobs and confidence.
Unemployment rate rises
The jobless rate has risen during January, the first time it has increased since Malcolm Turnbull became Prime Minister. Courtesy ABC News 24.
With the government undecided on its approach to tax and budget policy, January's employment statistics show the jobs market has shed 7900 jobs since the end of 2015, defying an expected 13,000 job increase and taking the unemployment rate from 5.8 to 6 per cent.
The second poor result since the abatement of a steady jobs surge through 2015 has some observers tipping the RBA board could now lower the cash rate when it meets on March 1.
That would take the official rate to a staggeringly low 1.75 - down from its already record low 2.0 per cent emergency level, where it has remained on hold for almost a year - having been set in April 2015.
But NAB economist Tapas Strickland cautioned against reading too much into the monthly number describing it as "employment returning to a more realistic pace after spectacular growth last year".
That was backed up by AMP Capital's chief economist, Shane Oliver, who said there was "unlikely to be anything in these numbers to move the RBA's dial on interest rates just yet".
Nonetheless, at 6.0 per cent, the jobless number appears at odds with Mr Turnbull's September promise of new economic leadership made while also describing this period as the most exciting time to be an Australian.
Voters have been told this week, that the May budget is now not likely to contain either significant tax cuts, which would worsen the deficit, or serious spending reductions to achieve a faster return to surplus, which could harm growth.
Instead, any restraint that is exercised will be restricted to new spending pressures, meaning any savings booked will be insufficient to fund promised income and company tax cuts of any scale.
What spending cuts are made look like being wholly directed to tax cuts, meaning the budget deficit - once described as a debt and deficit disaster - could blow out further.
Voters are being prepared for milder than expected tax relief to partially address bracket creep "going forward".
The government had wanted to reverse the problem of middle-income earners getting slugged at the second-highest tax rate of 37 cents in the dollar for part of their earnings despite not getting a pay rise. However, it now looks set only to arrest the process to limit future drift into higher brackets.
Less than a day after Mr Morrison dashed hopes of significant pre-election tax cuts, Finance Minster Mathias Cormann said low inflation, including low wages growth, had reduced the urgency, meaning the government would now do "as much as we can and as much as we can sensibly afford".
"But given that wage inflation is comparatively low, that inflation generally is comparatively low, the problem is there but it's not there to the same extent as to what it might have been in the past," he told Radio National.
"We'll have to make judgments on what is affordable."
The government still argues that bracket creep "is a drag on growth" but the latest comments raise doubts about what, if anything, might be done to prevent it.
"Obviously given what is happening in terms of comparatively lower wage inflation and what is happening in terms of of comparatively lower inflation right now, bracket creep, to the extent that is it a problem, and it is, it is slightly less of a problem than it was, that gives us a little bit of room to re-calibrate in a more affordable fashion our ambition in this area," Senator Cormann told ABC radio.
Unsurprisingly, the opposition leapt on the comments, with Bill Shorten claiming the government's economic policy was adrift and that the Treasurer was out of his depth.
"Australians want to see less talk, more action. I think it's becoming increasingly clear that Mr Morrison, the Treasurer, not only is he out of his depth but he and Mr Turnbull have no plan for Australia's future," said Mr Shorten.
Mr Shorten believes the government is playing for time, having put its main hopes in the "rivers of gold" from a higher GST and now being left "without a plan B" after the GST option was officially dumped.