As many as 3.4 million Australians could be out of work in coming weeks because of restrictions imposed to slow the spread of the coronavirus, according to a think tank.
The Grattan Institute warns governments must stand ready to introduce substantial stimulus policies to boost demand as the coronavirus crisis subsides, otherwise the economy could suffer a long and deep recession, with more than a quarter of the workforce out of a job.
But CommSec’s chief economist Craig James says more will be needed during both the survival and recovery stages.
“It is premature to focus on how the measures will be paid,” he said.
“Far more important is the aim of getting the country through the crisis and then getting to the point that restrictions can be eased.”
The Grattan Institute has calculated that between 14 to 26 per cent of Australians – 1.9 to 3.4 million people – could be out of work in the coming weeks as a direct result of spatial distancing measures now in place, “if they aren’t already”.
The JobKeeper wage subsidy will mask the full impact since people are still counted as employed while receiving the payment, leading to an unemployment spike of between 10 to 15 per cent.
A separate analysis of unemployment trends from ratings agency S&P suggests coronavirus will lead to much higher unemployment than previous recessions.
That’s in part because the crisis is hitting hard in the services sector, which has been the overwhelming driver of jobs growth since 2000.
Since the 1980s, the average bust has lasted about 18 months but the recovery takes close to three years.
“The unfortunate truth about jobs in almost every economy in the world is that they are easily lost but hard to win back,” S&P’s Asia-Pacific chief economist Shaun Roache says.
The figures tally with Treasury estimates the unemployment rate will peak at 10 per cent in the June quarter.
The International Monetary Fund predicts Australian unemployment will average 7.6 per cent this year, but rise to 8.9 per cent in 2021, confirming this takes into account the JobKeeper package.
Treasurer Josh Frydenberg stood by his department’s analysis, which also suggested unemployment would have topped 15 per cent without the wage subsidies.
“When it comes to unemployment, there is no doubt we’re going to see higher unemployment here as a result of the economic impact of the coronavirus,” he told reporters in Canberra.
“We are doing … everything we can to keep that formal connection between employer and employee.”
Shadow treasurer Jim Chalmers disputed this, pointing out Mr Frydenberg hadn’t used his powers to expand the JobKeeper payments to short-term casual employees or moved to help the floundering airline Virgin Australia.
“Any government who takes seriously its responsibility to protect the economy during this extraordinary health crisis would be doing more to prevent unemployment queues getting longer than is absolutely necessary,” he told reporters.
People on low incomes, younger Australians and women are bearing the brunt of job losses.
The social services sector is calling for a permanent lift to unemployment payments – temporarily doubled to $1100 a fortnight – and for the government to step up its obligations to help people find jobs.