Australia’s unemployment rate is set to surge to ten per cent – a level unseen since 1994 – as a result of the coronavirus shutdowns.
Both the Reserve Bank of Australia and Treasury are expecting the official unemployment rate to exceed ten percent this month as the health pandemic caused an even faster downturn than the 1930s Great Depression.
The unemployment level surged from 5.2 per cent in March to a five-year high of 6.2 per cent in April as the closure of non-essential hospitality businesses caused 600,000 Australians to either go on the dole.
The rate would have been higher if not for the numbers on the temporary JobKeeper welfare program which will end in September.
International tourist arrivals plunged by a record 99.3 per cent in April, following the closure of Australia’s border to non-citizens and visitors.
Australia’s unemployment rate is set to surge to 10 per cent, reaching a level unseen since 1994 as a result of the coronavirus shutdowns. Both the Reserve Bank of Australia and Treasury are bracing for a double-digit jobless figures this month as health pandemic causes an even faster downturn than the 1930s Great Depression. Pictured is a Centrelink queue at Abbotsford in Melbourne
While some businesses are slowly reopening, many shops across Australia remain closed as some gyms struggle to attract back their old members. Pictured is a reopened Fitness First gym at Hornsby in Sydney’s north
Economists are expecting the May unemployment figures, due for release on Thursday, to edge higher as the economy sank into recession for the first time in almost three decades.
The number of payroll jobs plunged by 7.5 per cent between March 14, before the business shutdowns, until May 30, new Australian Bureau of Statistics data released on Tuesday showed.
The means the number of people with a job has fallen from 13million to 12million in two months.
While that jobs decline was steep, many of them won’t show up as officially unemployed, as shutdowns have stopped people being able to find another job.
Many people in this situation would have left the labour market in despair.
National Australia Bank chief economist Alan Oster said the jobless rate for May was likely to rise only slightly to 6.5 per cent, as those not looking for work – who are not included in unemployment figures – was much higher than usual due to COVID-19 shutdowns reducing available employment.
The true level of unemployment, beyond the ABS definition of someone actively looking for work, was likely to be much higher.
‘The unemployment is already close to ten but the system defines unemployed as, one, don’t have a job and, two, and are actively looking to find another job,’ Mr Oster told Daily Mail Australia.
‘A lot of people in industries that have closed down, they still want to stay in those industries who obviously aren’t looking for a job.’
Mr Oster said a much higher 19.9 per cent of the Australian labour market was either unemployed, had given up looking for work or was under employed.
‘That is what we call the under-utilisation of labour,’ he said.
‘Take the unemployment, you add on those who are not actively looking for a job and you add on those who are working less hours.’
In a sign of things to come, the Department of Social Services revealed earlier this month the number of people on JobSeeker – covering unemployment, sickness and Youth Allowance benefits – surged by 300,000 in just one month, climbing from 1.346million on April 24 to 1.641million by May 22.
International tourist arrivals plunged by a record 99.3 per cent in April, following the closure of Australia’s border to non-citizens and visitors. Pictured is an empty Sydney Opera House in March
While some businesses are slowly reopening, many businesses across Australia remain closed or open in a restricted form as social distancing rules remain in place and many people continue to work from home and are not visiting shopping areas.
‘As you reopen, and even if you don’t lose any more jobs, the unemployment rate goes up because people are now trying to find a job, so therefore they’ll be counted as unemployed,’ Mr Oster said.
Despite that, Prime Minister Scott Morrison is adamant the $70billion JobKeeper program, providing $1,500 a fortnight wage subsidies, won’t be extended beyond the September end date.
‘There will always be a case made for spending more and for spending longer, and there are plenty who are happy to make that case,’ he said on Monday.
This is despite Treasury and the Australian Taxation Office last month revealing the program would cost way less than the original $130billion price tag announced at the end of March as the extent of the pandemic was much smaller than first feared.
Prime Minister Scott Morrison is adamant the $70billion JobKeeper program, providing $1,500 a fortnight wage subsidies, won’t be extended beyond the September end date. Pictured is a Centrelink queue in Brisbane in March
Mr Oster said the government would need to maintain JobKeeper to struggling sectors, like international tourism, universities and commercial property.
‘You can’t just turn it off,’ he said.
‘There are large chunks that will basically still be almost dead by the time you get to the end of September.’
Should the government’s earlier unemployment predictions come true, Australia would by June have a ten per cent jobless figure for the first time since April 1994, when Paul Keating was Labor prime minister.
Following the last recession in mid-1991, unemployment reached ten per cent in September of that year and remained in double digits for 32 months.
National Australia Bank chief economist Alan Oster said the government would need to maintain JobKeeper beyond September to help struggling sectors, like international tourism, universities and commercial property. Pictured is an empty Museum of Contemporary Art cafe overlooking Sydney’s Circular Quay
NAB had earlier predicted an 11.7 per cent jobless rate, the highest since the 1930s Great Depression, but was now predicting a smaller 8.5 per cent peak.
‘To get paid the dole, you don’t actually have to be looking for a job – those rules are not going to change until July so therefore the unemployment rate is going to start going up once people have to go looking for a job,’ Mr Oster said.
‘Hopefully, by July, we think the labour market might be a bit better and maybe it won’t go up as aggressively as we previously thought.’
Treasurer Josh Frydenberg earlier this month confirmed Australia was most likely already in recession, after official data showed the economy contracted by 0.3 per cent in the March quarter – the first since early 2011.
Treasurer Josh Frydenberg earlier this month confirmed Australia was most likely already in recession, after official data showed the economy contracted by 0.3 per cent in the March quarter – the first since early 2011
‘The answer to that is yes,’ he said.
‘That is on the basis of the advice that I have from the Treasury department about where the June quarter is expected to be.’
Mr Frydenberg is the first Australian treasurer to confirm a recession since Paul Keating as an ambitious treasurer memorably said in late 1990: ‘This is the recession that Australia had to have.’
The unemployment figures for June won’t be released until July 16.
Australia won’t have official confirmation of a recession until September 2, when the ABS national accounts figures for the June quarter are released.
The Reserve Bank is already expecting Australia’s economy to shrink by 10 per cent in the first half of 2020 – which would be equivalent to four-and-a-half years of gross domestic product growth.