WE have an unemployment problem, and it's serious. The Hunter Valley (excluding Newcastle) has the third-highest unemployment rate of the nearly 100 regions in Australia. At 9.7 per cent the only places worse off are Mandurah (Western Australia) and Outback Queensland.
To fix this we need more government spending in the region.
The Hunter's unemployment is such a problem because so many of the unemployed are young: 21 per cent of Hunter youth are not in work or study. Youth unemployment chips away at people's potential. Those early years in the workforce are crucial for learning new skills and picking up good habits.
Hunter unemployment is not just a problem for those without work and their families: it affects all of us.
So how can we fix it? Economists usually talk about three ways to boost growth and reduce unemployment: cutting interest rates, cutting taxes or raising government spending.
Cutting interest rates can lower unemployment for the country as a whole, but cannot target particular regions. The Reserve Bank is considering cutting rates to reduce the national unemployment rate of 6.2 per cent. But cutting them enough to get our unemployment under control would cause other regions to overheat, like Sydney's Eastern Suburbs, where unemployment is 1.9 per cent.
Cutting taxes also cannot target the Hunter specifically. Tax cuts for high incomes, as recently proposed by Scott Morrison, will benefit the cities rather than the regions.
There is also no evidence that wealth trickles down from the rich: a global study by the IMF in 2015 found that "increasing the income share of the poor and the middle class actually increases growth, while raising the income share of the top 20 per cent results in lower growth—that is, when the rich get richer, benefits do not trickle down.
That leaves us with more government spending. This is perfect because it can be targeted to the areas that need it most - like keyhole surgery.
What should the money be spent on? Well, the great Cambridge economist John Maynard Keynes famously said that paying people to dig holes and fill them in again would be a start. This is because when people spend those wages it gets money flowing around the local economy, giving it a kick-start.
We can do better than that, though. Infrastructure is an obvious one - we could certainly do with better roads, broadband and public transport. Better again would be to fund local TAFEs (rather than the cuts currently being proposed) and training programs, where the unemployed can learn the skills needed for a new job. Earmarking more money for better healthcare and disability services in the Hunter would also help because, again, it gets money flowing around our region.
There are many ways for the government to pay for this. One might be to redirect funds from areas where unemployment is much lower.
Another would be through taxes. A higher GST is not the way to do it, because that falls more heavily on the poor - exactly the people we're trying to help. Instead, revisiting the carbon tax would raise the same amount while costing households less, as it is paid more by local and foreign companies.
Unemployment in the Hunter is a disgrace. We shouldn't accept it any longer.
Dr Samuel Wills lives at Hawks Nest and has a Doctorate in Economics from Oxford University