Australia’s success in fighting COVID-19 means that it will be able to open up sooner, with the recovery supported by farming and key trading partners who have also weathered the storm – but the country will carry the burden of the COVID-19 crisis for some time, according to Deloitte Access Economics.
“Families are struggling with the toxic trio of high debt, high unemployment and low confidence, and 2020 is a shocker of a year,” said Chris Richardson, partner at Deloitte Access Economics. “The ranks of the unemployed will be badly swollen for a while.”
A lack of immigration will also weigh on the recovery, with population growth set to stall and an immediate impact on tourism and education, while JobKeeper – which has bought “vital time for businesses” – is hiding the true number of unemployed. Hours worked are currently down 10 per cent, pointing to a long, gruelling effort to bring unemployment down across the coming years, while the cost of keeping “zombie jobs” alive through wage subsidies continues to rise.
Despite that, Mr Richardson believes the government shouldn’t rush to an austerity budget before the recovery is in the bag, and that JobKeeper will need to continue – albeit in a tweaked form – to prevent “generational damage”.
“The complexity of exiting from this emergency is high,” Mr Richardson said. “And things keep changing fast. So, over and above existing reasons to have higher unemployment benefits anyway, keeping JobSeeker stronger for longer will be vital in filling the cracks as emergency safety nets morph or disappear.”
Interest rates will also be “nailed to the floor for years”.
“That’s because (1) this is a big recession, (2) inflation is as dead as a door nail, (3) governments will bow out of their support, leaving it up to central banks to repair economies, (4) economies are more accident-prone than ever before, so central banks will be super cautious and, finally, because (5) interest rates are more powerful than ever.”
