Australia has “gone well past the word recession” but it has handled the economic impacts of the coronavirus pandemic well, according to Treasury secretary Steven Kennedy.
Kennedy on Thursday told the Senate Select Committee overseeing the government’s response to COVID-19 that while Australia’s debt would likely continue to rise, he wasn’t worried.
“In the face of this crisis, I haven’t been—and continue not to be—particularly concerned about the level of debt we’ll be left with at the end of this,” he said.
“It will be significantly higher, but I think that in the face of the crisis and shock we are facing it’s entirely appropriate for the government to be responding this way.
“We are a country that, amid all the global gloom, is looking pretty good, frankly, in a world that is pretty disrupted.”
He noted that before COVID-19, there were already around 700,000 people unemployed — roughly 5.1%.
The Australian Bureau of Statistics’ April labour force data showed the number of employed people had declined by 600,000, with the unemployment rate sitting at 6.2%, the highest since September 2015.
Kennedy told the committee “there was a much larger withdrawal from the labour force than we anticipated”.
“I do anticipate that a very large portion of those people who withdrew from the labour force will go back into the labour force and be unemployed, partly because, just from a statistical perspective, you have to be available to work in the reference week, and the reference week happened to be a week in which there were a lot of restrictions,” he said.
“It was a very disturbing outcome, but one in line with what we expected…I wouldn’t be the least bit surprised to see the measured unemployment rate still rise quite significantly from that 6.2%, simply as people who left the labour force now come back into the labour force looking for work.”
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He argued “the extent to which our workers and labour are underemployed is substantially more than what a 6.2% unemployment rate would indicate”, estimating the unemployment rate to be 15%, and the underemployment rate to be 19.9%.
Shadow treasurer Jim Chalmers and shadow employment minister Brendan O’Connor on Thursday called on the federal government to outline its plan to support Australians when the government’s jobkeeper scheme ends in September.
“Support could be better targeted, or tapered, but it shouldn’t just ‘snap back’ on an arbitrary timeline which doesn’t reflect the reality in workplaces and communities,” they said in a statement.
In light of the April figures, Kennedy said Treasury’s advice to the government wouldn’t change much in the short term because the numbers were likely “attached to the necessary measures to protect the community on the health side”.
“In that period, for example, we had a number of states with their schools closed. There were quite a lot of parents who would not have been available for work in that week because their circumstances had significantly changed,” he said.
“I think we’ll need another month or two to see how it begins to wash out in the statistics.”
He did note, however, that the jobkeeper scheme would be reviewed, and Treasury would consider several issues, including whether the payments should be targeting specific industries.
When asked if Australia was facing a global recession or depression, Kennedy told the inquiry “we’ve gone well past the word ‘recession’”.
“Even if an economy fell by 10% in a quarter and happened to grow either side of it, I wouldn’t be trumpeting, ‘Wow, we avoided a recession,’ because you just fell by 10% in the quarter,” he said.
“For this sort of disease-led shock, the nature of the recovery is related to how well we manage the disease, which is hard to predict, but in Australia we’ve obviously done extremely well, which means there is the capability for other countries to do well as well. Then it’s very much the flow-on consequences of the fact that you take economies and then you create this big hole in income for a quarter or two.”