Unemployment is expected to rise to its highest level in 26 years, as JobKeeper is reclaimed and the benefit payments are diluted during a recession.
Reserve Bank of Australia Governor Philip Lowe made the forecast less than two hours after the government announced that the wage subsidy program would continue for another six months, but would be cut.
“In addition to this complicated picture, the fact is that unemployment is likely to increase, even with the recovery approaching,” said Dr. Lowe.
Unemployment is expected to rise as JobKeeper is reclaimed and benefit payments are diluted. Reserve Bank of Australia Governor Philip Lowe made the forecast less than two hours after the government announced that the wage subsidy program would continue for another six months, but would be cut.
As of September 28, $ 1,500 per two weeks of JobKeeper payments will be reduced to $ 1,200.
The number of workers receiving wage subsidies will more than halve by 3.5 million to 1.4 million in the last three months of 2020.
That drops to a million in early January.
The $ 70 billion program would end on September 27, but will instead be extended until March 28, with taxpayers raising another $ 16.6 billion.
JobSeeker’s unemployment benefits are also increased by $ 250 every two weeks to $ 815.70 on top of the old Newstart single rate of $ 565.70, at $ 3.8 billion.
The unemployment rate in Australia rose to 7.4 percent in June, the highest level since November 1998. The Reserve Bank expects the unemployment rate to reach nine percent by December, which would be the highest level since November 1994
More than 1.6 million Australians, including the unemployed and those on sickness and grief, will have their benefits temporarily doubled with a $ 550 coronavirus supplement through September 24.
Unemployment in June amid COVID-19
The unemployment rate in Australia rose from a 19-year high from 7.1 percent in May to 7.4 percent in June – the highest since November 1998
The unemployment rate rose from 923,000 to a record high of 992,300
Nearly a million people were unemployed for the first time – more than 960,200 records in December 1992
Unemployment increased, although 210,800 more people worked as COVID-19 closures declined
This was because the participation rate rose from 62.7 percent to 64 percent as more people looked for work
Source: Australian labor force data for June
The unemployment rate in Australia rose to 7.4 percent in June, the highest level since November 1998.
The Reserve Bank expects the unemployment rate to reach nine percent by December, the highest level since November 1994.
Economists generally agree that Australia is in recession for the first time in 29 years due to the COVID-19 shutdowns.
Dr. Lowe said unemployment is likely to rise in 2020 as an economic recovery spurred more people to look for work.
“This is because many of the people who have lost their jobs recently have been classified as not in the workforce and so are not considered unemployed,” he said.
“As the labor market continues to improve, we expect many of these people to look for jobs and thus be classified as back into the workforce.
“This will increase measured unemployment, while at the same time increasing the share of the labor force with a job.”
The Westpac bank predicts a $ 240 billion deficit for fiscal year 2020-21, which would be about 12 percent of gross domestic product.
As a share of the economy, that’s nearly triple the 4.2 percent deficit from 2009-10 when Labor was in power during the global financial crisis.
During the COVID-19 pandemic, the government has already spent $ 174.1 billion on prosperity-boosting programs, and the Reserve Bank has spent another $ 90 billion providing loans to banks for cheap small business loans.
Nevertheless, Dr. Lowe insisted that Australia’s gross government debt, before assets were consumed, was much lower than in other rich-world economies
With the highest government spending since World War II, Dr. Lowe for the idea of printing money and depositing money into any bank account, even with low inflation and interest rates.
“There is no free lunch. The tab must always be paid and it is paid in some form from taxes and government income, “he said.
Nevertheless, Dr. Lowe insisted that Australia’s gross government debt in 2019, before the coronavirus pandemic, was much lower than in other wealthy global economies.
“Debt at all levels of government in Australia, relative to the size of our economy, is much lower and likely to remain so in many other countries,” he said.
Treasurer Josh Frydenberg will publish an economic statement on Thursday.