Early government estimates of unemployment peaking at 10 per cent could a best-case scenario.
New analysis by the Grattan Institute projects more than a quarter of all workers could be shown the door by their employer, as the coronavirus outbreak shuts down entire sectors of the economy.
“Between 14 and 26 per cent of Australian workers could be out of work as a direct result of the coronavirus shutdown, and the crisis will have an enduring impact on jobs and the economy for years to come,” economists Brendan Coates and Matt Cowgill said in the working paper.
“More than half of all workers in the hospitality industry could lose their livelihoods, as will many workers in retail, education, and the arts.”
The sobering analysis warns that lower-income workers will be driven out of the labour force at twice the rate of their high-income peers, while women and the young disproportionately represent the hardest-hit sectors.
“If our estimates are even close to accurate, Australia is facing either the worst or one of the worst economic downturns in its history. And there could be a ‘second wave’ hit to the economy even after the immediate health threat eases,” Coates and Cowgill said, noting a fast ‘V-shaped’ recovery was not likely.
They put the unemployment rate to peak somewhere between 10 per cent and 15 per cent, but warn the worst will be “disguised”, not fixed, by the federal government’s $130 billion JobKeeper package.
“Some Australians off work will continue to be regarded as ’employed’ because they will receive pay from their employer via the JobKeeper scheme. And others, especially older workers, will give up looking for work and will therefore not be counted in the unemployment rate,” Coates and Cowgill said.
Just as a rising participation rate – the proportion of Australians in work or looking for it — had helped exacerbate the unemployment rate higher previously, so too will a falling rate soften it, the pair theorise.
Of course, just because those unemployed are “obscured” from the data, they nonetheless remain in need of a job. Given Grattan still expects a softened unemployment headline figure to go as high as 15 per cent, its outlook is dire.
Given relevant labour data won’t be released until the middle of May means much of the current forecasting is guessing at how bad things are right now. But from consumer confidence surveys to the current number of job ads, the early anecdotal signs aren’t comforting. Consider the country’s recent search history for example.
Just how many Australians will be put out of work will depend on how long the shutdown lasts and how many businesses are forced to shutter as a result, with Grattan flagging that more stimulus will be needed to see workers through the crisis.
“Australia’s governments are rightly spending record amounts trying to cushion Australian workers and businesses from the worst impacts of this unprecedented crisis. But this working paper shows that the economic shock from COVID-19 is going to be so big that more support will be needed.”
It could see Australia get ever closer to that fabled $1 trillion debt.
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