Coronavirus: ‘recovery rapid but jobs must be saved’, says report

Australia’s economy is set to ­rebound more rapidly from COVID-19 than any other ­country, according to a peak economic report.

Deloitte Access Economics Director Chris Richardson says the budget position is not ­necessarily of concern as it could be addressed, as would debt, once the economy begins to grow again. Picture: AAP

Australia’s economy is set to ­rebound more rapidly from COVID-19 than any other ­country, according to a peak economic report, with the nation set to outperform the global economy on the other side of the crisis.

However, it also warned of a “lost generation” among the young if the unemployment rate didn’t begin to turn around within 12 months, with forecasts that it may not return to the pre-coronavirus level of 5 per cent until 2024.PDF: How COVID crash compares
Treasurer Josh Frydenberg will deliver a major economic statement on COVID-19 on Tuesday — the day the budget would have been held, before it was delayed until October.

It is understood that Treasury had not provided a fiscal outlook or a statement on the budget position because of the uncertainty of the numbers over the course of the crisis.

A Deloitte Access Economics update to be released on Monday, however, forecasts a 10 per cent hit to national income, which it ­describes as “a jaw-dropping shortfall of just under $200bn”.

It also forecasts a budget deficit this year alone of $162bn with no sight of a return to surplus.

There would be a double hit to the budget with income tax revenue down $14bn this year and $37bn next year with lower wages due to JobKeeper.

But it also confirmed that there had been no structural damage to the budget position from the ­government’s $230bn-plus spending program to ringfence the economy, raise welfare payments to the jobless and save businesses.

It suggested there was a case for even longer and bigger deficits to help refuel the post-COVID economy.

Chief economist and Deloitte partner Chris Richardson said the budget position was not ­necessarily of concern as it could be addressed, as would debt, once the economy began to grow again.

However, he said the recovery would be slow and that if the virus was the first crisis to deal with, unemployment was the second.

“If we’re too slow in getting unemployment down, there’ll be generational damage in job prospects,” he said.

“Our defence against coronavirus has been world-leading, but just beating back the virus isn’t enough.

“The ‘mission accomplished’ signs can’t be put up until unemployment is back at 5 per cent. On our forecasts, this won’t happen until late 2024.”

The report also takes aim at Labor senator and opposition home affairs spokeswoman ­Kristina Keneally’s call to ­reduce migration to save Australian jobs.

“Cutting off the intake of ­migrants wouldn’t help the unemployment rate come down,” Mr Richardson said.

“Migrants don’t steal jobs.”

Mr Frydenberg said: “Every arm of government and industry is working to keep Australians in jobs and businesses in business.

“In Deloitte’s words, the ‘JobKeeper’s simplicity and one-size-fits-all approach in its rollout proved to be the difference in preventing anywhere between an extra half a million and over one million Australians from becoming unemployed’,” Mr Frydenberg said.

“On top of this support for business and jobs, the government has also effectively doubled the rate of income support to $1100 a fortnight with the coronavirus supplement.”

Labor seized on part of the ­report that suggested there could be a case for tapering off the JobKeeper and JobSeeker support payments rather than going “cold turkey”.

Opposition Treasury spokesman Jim Chalmers said the Deloitte Access Economics report warns against Scott Morrison’s economic “snap back”, with Labor using the budget analysis to warn against the “rapid withdrawal of support programs, including JobSeeker and JobKeeper”.

“The monitor warns against the Morrison government’s ­shortsighted “snap back” ­strategy and highlights that ongoing support for workers, ­vulnerable Australians and the broader economy will be critical to the recovery,” Dr Chalmers said.

“Scott Morrison and Josh Frydenberg don’t have a plan to protect more jobs and ensure support is provided to workers, businesses and communities in the months and years ahead as we transition out of this crisis.”

Dr Chalmers said the report was a “sobering assessment” of the COVID-19 impact on the economy and budget.

“Weak growth, stagnant wages, record high household debt, falling business investment and record high ­underemployment were major economic challenges before the virus and are expected to ­hamper Australia’s recovery,” he said.