RBA says JobKeeper might be needed for longer

RBA Governor Philip Lowe has warned the Federal Government that its plan to end the $70 billion JobKeeper wage subsidy in September would come at a “critical” period in the nation’s financial recovery from the COVID-19 crisis.

THE economic hit from the coronavirus pandemic has been less severe than initially feared but the $70 billion JobKeeper wage subsidy might need to be extended, according to Reserve Bank Governor Philip Lowe.

Dr Lowe told the Senate COVID-19 Committee that the loss of 600,000 jobs during the coronavirus pandemic had been “shocking” but “not quite as bad” officials had expected.

His comments came as new Australian Bureau of Statistics figures showed 72 per cent of businesses had reported a fall in revenue due to COVID-19 and nearly three in four had accessed support measures such as JobKeeper.

Reserve Bank of Australia Governor Philip Lowe appears by audio visual link at the Senate Inquiry into COVID-19 (AAP Image/Mick Tsikas)

Dr Lowe earmarked September, when the $70 billion JobKeeper program and other stimulus measures are due to stop, as a ”critical” period of the recovery.

“If we have not come out of the current trough in economic activity (by then) there will be and there should be a debate about how the JobKeeper program transitions into something else or whether it’s extended into specific industries or somehow tapered off,” he said.

“It’s very important we don’t end the fiscal stimulus too early.”

He also flagged an era of record low interest rates as he believed it would likely take “some years” before unemployment and inflation stabilised in the RBA’s target range.

Dr Lowe said jobs losses seemed to have bottomed out however the labour force was a “complex picture”.

“We will see further declines in jobs,” he said.

“They will not be as stark as the declines we saw in April. I think the worst of it was the period up until mid- to late-April. Since then, there has been some stabilisation. In certain parts of the economy there has been a recovery in jobs.”

Reserve Bank Governor Philip Lowe has warned there will be more job losses but not like the mass-shedding recorded in April. (Photo by William WEST / AFP)

Treasurer Josh Frydenberg said the government’s stimulus measures were “temporary, targeted and proportionate” without “undermining the structural integrity of the Budget”.

“The Government’s unprecedented economic response to the coronavirus pandemic is supporting millions of workers and businesses build a bridge to the other side of the crisis,” he said.

Opposition Treasury spokesman Jim Chalmers backed the call for continuing stimulus saying any “sudden withdrawal of support” in September “makes no sense at all”.

“The less done to protect jobs and support vulnerable workers, business and communities in the coming months, the harder and longer the recovery will be,” he said.

Australian National University professor Nicholas Biddle said policies like JobKeeper appeared to have kept people in jobs and cushioned the economy from the full impact of coronavirus.

Prof Biddle will release new research today showing there have been no net job losses since April and a slight increase in the average number of hours people have worked.

“Compared to many other countries, it would appear that the employment outcomes of

Australians have not been as affected as we might otherwise have feared,” he said.

“It shows the extraordinary economic measures taken by the Government appear to be helping stem the hit to employment caused by this global pandemic.”