Australians warned to prepare for a long economic recession as JobKeeper spats flare up

Australians have been warned to expect a long road ahead before the economic disaster turns around, as spats over JobKeeper flare up.

Australians have been warned to expect the aftermath of recession and high unemployment levels to linger for years amid warnings the “human costs” for getting economic decisions wrong is “diabolical”.

It was a day of political punches between the parties on Wednesday, with one of the key discussion points on the government’s plan — or lack of — for job creation across the country as the nation struggles to overcome the COVID-19 pandemic.

Federal Treasury is understood to be waiting for Victorian Premier Daniel Andrews to reveal his road map out of lockdown before announcing an economic recovery plan.

Treasurer Josh Frydenberg made reassurances that “jobs are coming back” but in fiery scenes in Canberra, Shadow Treasurer Jim Chalmers warned that “the plan for the future and the plan for jobs is entirely absent”.

“It’s not just for the next few months … and not even for the next few years,” he said.

“If the government continues to get things wrong, this nation will wear the costs and consequences of that for generations, and that’s what we’re trying to avoid.”

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Treasurer Josh Frydenberg. Australia's GDP figures have confirmed the country's first recession since 1990-1991 with the economy shrinking by 6.3 per cent in the past 12 months. Picture: David Gray

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The release of the June national accounts data on Wednesday revealed the catastrophic extent mere months of lockdown created across the country.

Economic figures showed Australia is in a recession for the first time in a generation, with the biggest quarterly fall on record (seven per cent) and the steepest annual plunge since the end of World War II.

Previously, the biggest drop was in 1974, when the Australian economy contracted by just 2 per cent in the June quarter.

More than one million Australians are now out of work and hours worked also fell a record 9.8 per cent. The RBA is expecting the downturn sparked by the pandemic will cause unemployment to peak at 10 per cent.

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A woman waits outside Centrelink in South Melbourne on Monday during stage 4 COVID-19 lockdowns across Melbourne. Picture: David Geraghty

Prime Minister Scott Morrison listening as Shadow Treasurer Jim Chalmers asks a question during Question Time at Parliament House in Canberra. Picture: Alex Ellinghausen

After the release of the grim figures, Labor leader Anthony Albanese attempted to move a motion in the House of Representatives to acknowledge the one million Australians out of work and 400,000 more expected to lose their jobs come Christmas.

“The Reserve Bank governor says unemployment is going to be higher for longer, and still around seven per cent in two years’ time,” Mr Albanese said.

“The Prime Minister is withdrawing support for Australians and the economy and … (Labor) therefore calls on the government to develop a plan to create jobs for Australians, instead of withdrawing support and cutting wages.”

However an attempt to debate it was shut down by the government.

Examining the figures on Wednesday, former Reserve Bank economist Callam Pickering told The Conversation they showed the economy being held together “with duct tape by JobKeeper and JobSeeker”.

The Morrison Government has already extended JobKeeper and JobSeeker payments until March next year due to the prolonged slump induced by COVID-19.

Legislation splitting JobKeeper into two tiers and extending the wage subsidy scheme for an additional six months has passed parliament this week.

The $1500 flat fortnightly rate will end later this month. After that, people who worked less than 20 hours a week before the pandemic will be paid $750 a fortnight, and those who were working more than that will receive $1200.

Without the JobKeeper wage subsidy, Treasurer Josh Frydenberg has warned an extra 700,000 Australians would be out of a job.

However Shadow Treasurer Mr Chalmers warned cutting JobKeeper will force the recession into “deeper and longer” territory.

“I think that at the end of today, when Australians tuck their kids in and fall asleep, all they will really have learned is that there are some abstract numbers from the Bureau of Statistics which confirm what they already knew, but they’re none the wiser about what the government wants to do about them,” he said.

Some thoughts on this deepest recession in almost a century, and what it means for our communities and our country. #auspol pic.twitter.com/mPOJaQheEq

— Jim Chalmers MP (@JEChalmers) September 2, 2020

"It's very difficult in this environment to act with any certainty about some of the economic numbers."@JoshFrydenberg #abc730 #auspol

— abc730 (@abc730) September 2, 2020

Yet grilled on ABC’s 7.30 program Wednesday night, Mr Frydenberg defended the government’s moves to cut back JobKeeper and claimed “the jobs are coming back”.

“I think it’s important to transition because outside of Victoria, the jobs are coming back,” Mr Frydenberg said.

“Seven out of eight jurisdictions are opening up and easing restrictions.

“Of the 1.3 million Australians who lost their job or saw their hours reduced to zero since the start of the crisis, we’re now seeing 700,000 or more than half come back, and of the 340,000 jobs that were created in the last two months, importantly 58 per cent of those have gone to women and 44 per cent have gone to young people.

“So there is some hope. There is a light at the end of the tunnel. We need to get the virus under control.”

In a day of interviews, Mr Chalmers argued the figures prove that more Commonwealth income support is needed and argued for the government to maintain the JobKeeper payment at its current rate until the situation improves.

“This is the worst recession in almost a century. We do already have a new record: more than a million Australians are jobless for the first time in the history of this nation,” he said.

“The government tell us that they expect something like an extra 400,000 Australians to join the unemployment queues between now and Christmas.

“But, remarkably, still not a word about what the government actually intends to do about it; still nothing that resembles a credible, genuine, comprehensive plan for jobs in this country. “And that is what the nation most needs right now, as we face these dark days of recession and the long tail of unemployment.”

“If the government is in such a rush to pull back on JobKeeper, where’s the jobs plan to replace it?”

“It makes no sense for them to be in such a rush to pull back JobKeeper, especially when they have absolutely no idea what they’re going to do to create jobs once that welcome support is withdrawn.

Mr Chalmers warned the recession would “hang around longer than it needs to” if the government gets three things wrong:

• Support in the economy: “Unfortunately, the government shows all of the signs of withdrawing that support too soon. As the Reserve Bank governor and others have pointed out, that does have the potential to cruel the recovery before it even gathers pace, and that is something we need to avoid”.

• Delivery of support: “The government says they’re delivering $314 billion of support, when in reality they can only get to $85 billion. What that means is that, having not got enough support out the door, the recession is deeper than it needs to be and it will hang around longer than it needs to hang around”.

• A jobs plan: “In their rush to withdraw support from the economy, the government don’t have a plan for jobs to replace it. The reality is they’re in this rush and they’re all clambering over each other to withdraw support out of the economy, but there’s nothing to replace it. That is also going to have devastating consequences for the economy”.