SYDNEY – Australia’s economy could shed more than 100,000 jobs in the coming months, significantly reducing what has so far been a stunning recovery as the federal government ends the wage subsidy program that has been a essential support for businesses and workers hardest hit by Covid-19 related lockdowns.
According to Nicholas Guesnon, an economist at the Commonwealth Bank of Australia, up to 110,000 people will lose their jobs in the coming months, with still vulnerable sectors of the economy, such as travel, bearing the brunt of the losses.
Such a jolt in the labor market could lead to a rebound in consumer and business confidence, slowing consumer spending, which has fueled the economy’s rapid rebound since mid-2020.
The government program called JobKeeper has supported around 1 million businesses and 3.6 million employees in mid-2020. That number fell to 500,000 businesses and 1.6 million employees at the end of 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 leading up to its withdrawal on March 28.
He expects high-risk industries to see up to 25% of employees affected by the payment lose their jobs; up to 10% in medium risk industries and 5% in low risk industries.
Work in the transportation, arts and recreation, accommodation and food services sectors is most at risk in the coming weeks, he added.
“These industries are sensitive to international travel and also suffer severely when restrictions and lockdowns are imposed,” he said.
The gloomy outlook arises despite the rebound in business and consumer confidence since the start of the year.
The National Australia Bank Business Confidence Index is up 10 points since December to +16 in February.
Consumer confidence also rose 1.5% last week, according to ANZ Roy Morgan.
Strong employment gains in recent months and strong GDP figures last week have boosted confidence, said David Plank, head of Australian economy at ANZ.
The rebound in confidence should help the economy quickly absorb the expected sharp rise in unemployment, economists said.
Su-Lin Ong, senior economist at RBC Capital Markets, expects the damage to the job market to be short-lived.
She predicts that the unemployment rate, which was 6.4% in January, will be below 6% by the end of the year. Yet the removal of JobKeeper will see unemployment rise to 6.7% in the coming months, then reverse quickly.
Leading labor market indicators such as job vacancies remain bullish and Reserve Bank of Australia governor Philip Lowe is expected to confirm the central bank’s policy on Wednesday that interest rates are unlikely to be identified until 2024 at the earliest.
Write to James Glynn at [email protected]