Frydenberg Sees Australian Jobless Rate Rising Amid Virus Crisis
Australian Treasurer Josh Frydenberg expects unemployment to increase and economic growth to slow down as the nation deals with government-imposed restrictions and social distancing to limit the spread of the coronavirus.
The government, which this week passed aA$130 billion ($83 billion) package to help keep people employed, said the plan will support about half of the Australian workforce. More than 800,000 businesses have already applied for the so-called jobkeeper program, Frydenberg said.
“There’s definitely going to be an uptick in unemployment and a significant reduction in growth,” he told the Insiders program on the Australian Broadcasting Corp. “This is a massive call on the public purse and it is a debt the country will pay for years to come.”
The jobless rate may rise to as much as 10%, from the 5.1% recorded in February, as companies have been forced to shutter stores and furlough workers amid government-imposed restrictions on the size of gatherings and non-essential business. The number of people unemployed would have been higher without the government’s job-rescue package, University of Technology Sydney Professor of Economics Warren Hogan said.
“We are still going to get some very bad numbers over the next three months,” Hogan told Sky News in an interview. “I think the unemployment rate will still get close to 10% but it could have been a much, much higher figure if we hadn’t had that legislation passed.”
Australia is reluctant to broaden the job-rescue package, which doesn’t include foreign workers or those on temporary visas. While businesses do have access to some funding support to retain these employees, the cost of placing an extra 1 million people on the government’s plan would be around A$18 billion, according to Frydenberg.
The package is “broad enough to get as many people through to the other side as we can,” Deputy Prime Minister Michael McCormack said on Sky News. “We have already have put in measures that are going to cost this country a lot for many, many years, but we don’t want to saddle ourselves with debt which we just can’t maintain.”
Australia will focus on expanding the economy, rather than on taxation, as it seeks to repay the funds used during the coronavirus shutdown, which may last as long as six months. The nation entered the crisis with a debt-to-GDP ratio of about a quarter of the U.S.’s and the U.K.’s, Frydenberg said.
Still, Hogan warned the payment programs the government has undertaken won’t be able to come to a sudden stop, otherwise it risks merely delaying, rather than defusing, the economic shock. While the public sector is likely to lead Australia out of the downturn, changes in the taxation system may also be required.
“The real issue around the government programs is they can’t just stop after six months, they need to taper,” he said, adding the tax system “has to be part of some sort of budget repair process, so the GST is certainly going to be in play.”
Frydenberg said there are “no plans” for changes to the tax system at present, adding he will be in contact with G20 treasurers and finance ministers as well as the International Monetary Fund in the coming week.
“There’s going to be a big hole in the global economy, there’s no doubt about that,” he said.
Source: Read Full Article