Construction and manufacturing sectors predicted to be next industries to suffer mass job losses

Leading economists have revealed which industries are most vulnerable to “horrendous” widespread staff cuts as the economy grinds to a halt.

Millions of Australians are expected to be plunged into unemployment as the coronavirus pandemic grinds the nation’s economy to a halt.

The closing of borders has effectively grounded flights and forced Qantas, Virgin Australia and Flight Centre to stand down thousands of staff, while strict social distancing measures have shut down pubs, clubs, gyms and restaurants.

The images of long queues snaking outside Centrelink sites were reminiscent of the Great Depression but the job losses are expected to accelerate, with prominent economists forecasting construction and manufacturing industries will be the next to feel the squeeze.

There are already rumours of mass job cuts within these sectors as building projects are put on hold or cancelled altogether.

Sharp declines are also expected in the property market, which AMP Capital chief economist Shane Oliver says will “slow to a crawl”.

“The longer the downturn goes on may mean a further reduction in construction activity, particularly in relation to housing,” he told news.com.au.

“Projects will be put on hold but some staff will be salaried employees and they will be stood down and have to take leave, but casuals and contractors are the most vulnerable.”

Leading independent economist Saul Eslake says the recent announcements from large and publicly listed companies of mass jobs cuts is concerning.

But he expects the unemployment data to reflect an even more depressed jobless rate because of the thousands of small companies shutting up shop which don't get the same attention.

“Let's say 1000 small businesses each lay off one or two people, that can't possibly make news until the unemployment figures come out,” he said.

“I suspect that quietly, across a range of businesses, you'll see jobs being lost.”

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A queue forms outside the Darlinghurst Centrelink office yesterday morning, long before the office is due to open. Picture: Rohan Kelly

Smaller independent builders fall into this category, with many operations running on a team with a handful of staff.

"We haven't seen too much yet about job losses in manufacturing or construction because the focus has been on areas such as retail, hotels and transport,” Mr Eslake told news.com.au.

“But manufacturing and construction are jobs that you can't do from home, almost by definition.”

Depending on how the Australian Bureau of Statistics categorises the suddenly unemployed, Mr Eslake says about 1.2 million will lose their jobs in the coming months, which will mean the jobless rate could rise to almost 14 per cent from its current level of just over 5 per cent.

The data won’t reveal the true cost of the losses, however, until the May figures are released in late June.

Dr Oliver said the job loss crisis caused heightened anxiety because of the widespread nature of the cuts — those who are made redundant have nowhere to go.

"It's just horrendous," he said.

"Normally when people are laid off there's other parts of the economy which are holding up and some of those people move into other areas.

"That's what has happened over the last decade — we've seen downsizing of the banks, downsizing in telcos, downsizing in manufacturing and the automobile industry, but there were other parts of the economy which eased the burden.

"Whereas in this case, you're not seeing that. It's a very different situation to what you normally see in a recession, let alone a depression.”

There are industries that are either booming or operating as normal in these unique circumstances.

The telco sector has shown signs of gaining business from the masses of Australians forced to work from home, while opportunities are rising for healthcare, the public sector is busy, and the production and delivery of food will be more important than ever.

There's also likely going to be plenty of work for drivers, particularly in the parcel delivery space and other home delivery services.

HOW WILL STIMULUS WORK?

As the number of confirmed Australian virus cases continues to rise, the government has added a new raft of stimulus measures to the first $17.6 billion package announced 10 days ago, taking the country’s total stimulus to $189 billion – or 9.7 per cent of GDP.

Here’s what you need to know.

SUMMARY OF NEW PACKAGE

• Coronavirus Supplement: $550 per fortnight payment for recipients of the JobSeeker Payment, Youth Allowance, Parenting Payment, Farm Household Allowance and Special Benefit for the next six months

• Early access to superannuation for struggling Australians

• Temporary reduction of minimum super drawdown rates

• Extra $750 for some households, including those on social security and veteran income support and eligible concession card holders

• Reduction of deeming rates by a further 0.25 percentage points

• Small and medium businesses with turnover under $50 million, along with not-for-profit charities, will be eligible for a tax-free cash payment of up to $100,000

• Support for airlines

• Temporary relief for financially distressed businesses

• Coronavirus SME Guarantee Scheme: Government to guarantee half a bank’s loan to a small or medium enterprise impacted by the virus

BENEFIT RECIPIENTS

Under its coronavirus plan, the government is temporarily expanding eligibility to income support payments and establishing a new, time-limited coronavirus supplement to be paid at a rate of $550 per fortnight.

That payment will go to existing and new recipients of the JobSeeker Payment, Youth Allowance jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit for the next six months.

Eligible income support recipients will receive the full amount of the $550 Coronavirus supplement on top of their payment each fortnight.

Services Australia will also expand its staff to 5000 to help the delivery of the new measures.

And social security and veteran income support recipients and eligible concession card holders will also receive an extra $750 payment – on top of the $750 payment announced on March 12.

This new payment will be made automatically from July 13 and about 5 million Aussies will benefit, including pensioners.

The original payment will also occur automatically from March 31.

The government is also reducing social security deeming rates by a further 0.25 per cent on top of deeming rate changes made during the first package.

From May 1, the lower deeming rate will be 0.25 per cent and the upper deeming rate will be 2.25 per cent.

The change will benefit about 900,000 income support recipients, including age pensioners.

SUPERANNUATION

Individuals struggling as a result of the COVID-19 outbreak will also be able to access some of their super early.

Eligible Aussies will be able to access up to $10,000 in 2019-20, and a further $10,000 in 2020-21.

To take advantage of the offer, you will need to apply online through myGov before July 1.

You won’t need to pay tax on released super, and the money withdrawn will not affect Centrelink or Veterans’ Affairs payments.

The government is also temporarily reducing superannuation minimum drawdown requirements for account based pensions and similar products by 50 per cent for 2019-20 and 2020-21.

It is designed to benefit retirees by providing them with more flexibility regarding how they manage their superannuation assets.

BUSINESSES

The government is providing up to $100,000 to eligible small and medium sized businesses and not‑for-profits – including charities – that employ people, with a minimum payment of $20,000.

The purpose of this payment is to boost cashflow and allow organisations to keep the lights on – and keep employees on the books.

Under the scheme, which builds upon the first stimulus package, employers will receive a payment equal to 100 per cent of their salary and wages withheld (up from 50 per cent), with the maximum payment being increased from $25,000 to $50,000.

In addition, the minimum payment is being increased from $2000 to $10,000. The payment will be available from April 28.

By linking the payments to business to staff wage tax with holdings, the government is hoping businesses will be encouraged to hold on to more of their workers.

The payments are tax free, there will be no new forms to fill out, and payments will flow automatically through the ATO to small to medium businesses with an annual turnover of less than $50 million that employ staff.

And from July 28, eligible businesses will receive an additional payment equal to the total of all of the Boosting Cash Flow for Employers payments received.

Another measure is the Coronavirus SME Guarantee Scheme, which will see the government guarantee 50 per cent of new loans issued by eligible lenders to SMEs.

And the government is also temporarily increasing the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive.

The package also includes temporary relief for directors from any personal liability for trading while insolvent.

The Corporations Act 2001 will be amended to provide temporary and targeted relief for companies to deal with unforeseen events that arise as a result of the coronavirus.