The Reserve Bank has sketched out the shape of the coronavirus-driven trough in Australia’s economy and the long recovery over the next few years.
Under the baseline scenario outlined in the quarterly statement on monetary policy released on Friday, restrictions stemming the spread of the virus would be largely lifted by September.
About a million more people are expected to be out of work by June than before the crisis started.
Hours worked will fall by a fifth in the June quarter.
Some of that decline is through people losing their jobs but it’s mostly due to those who have kept their positions but had hours cut – most acutely in hospitality, entertainment and tourism and for casual workers.
But the jobless rate won’t so much bounce back as be slowly pushed along, returning to 6.5 per cent by mid-2022.
Even in the best-case scenario, where the virus outbreaks are limited and restrictions are lifted faster, unemployment won’t return to five per cent for a couple of years.
It had dropped to 5.1 per cent in February.
The unemployment peak could be lower but accompanied by a higher drop in participation if people decide the job market is too weak and it’s not worth looking for new work yet.
The RBA warns businesses may be slow to rehire workers.
But it also says if unemployment doesn’t fall in line with expectations, people will keep their wallets closed and the overall recovery will take longer.
“It is quite plausible that the current economic disruption will have some long-lasting effects, not only because it will take some time to restore workforces and re-establish businesses but also because it could also affect mindsets and the behaviours of consumers and businesses,” the RBA statement says.
“This could result in structural change in the economy.”
State and federal leaders on Friday agreed to a three-stage plan for lifting most restrictions by the end of July.
Prime Minister Scott Morrison said Treasury had advised this timeframe would lead to 850,000 jobs being restored.
However, that includes people stood down and receiving the JobKeeper wage subsidy who aren’t counted in official jobless figures.
Asked whether people on the temporarily-doubled JobSeeker unemployment payment could be assured of getting all that money for the whole six months promised, Mr Morrison said he wanted them back in jobs as soon as possible.
“People don’t want to be on JobKeeper and JobSeeker. They want to be in a job that’s paying them,” he told reporters.
“And that’s what this plan is about – not to keep people on income support from the taxpayer, but to have a wage that’s provided by a business that’s successful and earning again.”
Opposition Leader Anthony Albanese said the RBA scenarios painted a picture of a long-term impact on the standard of living in Australia.
“The government needs to acknowledge the idea of snapback is simply not going to work,” he told reporters.
“They’ll need to put in place measures that keep people in employment, that promote employment, and that promote economic activity if we’re not going to have a prolonged downturn.”