Post-JobKeeper hit could puncture recovery

The end of JobKeeper could change the economic circumstances of thousands of Australians. Picture: David Crosling

Australia’s economy could shed more than 100,000 jobs in coming months, putting a significant dent in what has so far been a stunning recovery, as the federal government ends the wage subsidy scheme that has been a critical support for firms and workers hit hardest by COVID-19-related lockdowns.

As many as 110,000 will lose their jobs in coming months, with the still-vulnerable sectors of the economy like travel bearing the brunt of the losses, according to Commonwealth Bank economist Nicholas Guesnon. Such a severe jolt to the job market could puncture a recovery in consumer and business confidence, slowing the consumer spending which has ­fuelled the economy’s rapid rebound since mid-2020.

The government’s so-called JobKeeper scheme supported about a million businesses and 3.6 million employees in mid-2020.

This dropped to 500,000 businesses and 1.6 million employees in late 2020 and then to 960,000 employees in January.

Mr Guesnon estimates that around 900,000 workers will still rely on JobKeeper in the days ­before it is withdrawn on March 28.

He expects that high-risk industries will see up to 25 per cent of employees on the payment lose employment, and up to 10 per cent in medium-risk industries and 5 per cent in low-risk industries.

Work in transport, arts and recreation, accommodation and food services industries are most at risk in coming weeks, he added.

“These industries are sensitive to international travel and also suffer badly when restrictions and lockdowns are imposed,” he said.

The gloomy outlook comes despite business and consumer confidence surging since the start of the year.

The National Australia Bank’s index of business confidence is up 10 points since December to +16 in February.

Consumer confidence also rose 1.5 per cent last week, according to ANZ Roy Morgan.

Strong gains in employment in recent months and last week’s strong GDP numbers have buoyed confidence, according to ANZ Head of Australian Economics David Plank.

The lift in confidence should help the economy to quickly absorb the expected sharp jump in unemployment, economists believe.

Su-Lin Ong, senior economist at RBC Capital Markets, expects the harm done to the job market will be short-lived.

She forecasts that the unemployment rate, which stood at 6.4 per cent in January, will be below 6 per cent by the end of the year.

Still, the removal of JobKeeper will see unemployment rise to 6.7 per cent in coming months but then quickly reverse.

Leading indicators of the job market such as job ads remain upbeat.

Reserve Bank governor Philip Lowe is expected on Wednesday to affirm the central bank’s policy stance, which holds that interest rates are unlikely to be raised until 2024 at the earliest.

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The Wall Street Journal