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JobKeeper tapering a risk to jobs
The RBA has outlined how a tapering of government support, including JobKeeper, could impact Australia’s recovery from the COVID-19 pandemic.
JobKeeper tapering a risk to jobs
The RBA has outlined how a tapering of government support, including JobKeeper, could impact Australia’s recovery from the COVID-19 pandemic.
In its quarterly statement, the central bank highlighted a growing concern about high and rising unemployment in the face of fading government support.
“There is a risk that business insolvencies will rise by more than expected as government support programs are tapered, slowing the recovery in activity, reducing investment and placing upward pressure on the unemployment rate,” the RBA’s report stated.
“By the same token, the unprecedented government interventions to support businesses and enable them to build cash buffers could cushion firms as support is unwound and provide the basis for a faster recovery than currently forecast.”
The RBA’s comments follow the Treasury’s comments at the Australian Business Economist webinar on Thursday, 5 November, when Treasury secretary Steven Kennedy said the movement may have to launch another series of interventions in the economy to help with unemployment post-COVID.
“Given the lack of monetary support available, the states and territories can also play an important role in supporting the economic recovery, especially in the areas where they have primary responsibility and are better placed to design and implement policy, including social and other infrastructure,” Dr Kennedy said.
Shadow treasurer Jim Chalmers said the decisions to cut JobKeeper and exclude many Australians from the new hiring credit scheme will mean that the recession will be deeper than necessary and the unemployment queues longer than they need to be.
“Australians need and deserve a comprehensive economic plan for the recovery to prevent a trillion dollars of debt and higher unemployment for longer being the only lasting legacies of this recession,” Mr Chalmers said.
He pointed out that much of the heavy lifting is being left to the central bank.
“The RBA has been forced to enact extreme measures to support the economy because the Morrison government is failing to prevent the jobs crisis from getting worse.
“It makes no sense for Scott Morrison to be pulling support out of the economy when unemployment is expected to be too high for too long.”
Treasurer Josh Frydenberg used a doorstop interview in Melbourne to point out the jobs recovery despite the tapering of JobKeeper.
“We’ve also seen job ads up this month by more than 9 per cent, and we’ve also seen loan approvals up by 5.9 per cent with particularly strong numbers for new loan approvals for new home construction off the back of the HomeBuilder program and other government incentives,” Mr Frydenberg told the media.
He also noted that the RBA’s slashing of the official cash rate was in line with the government’s support of the Australian economy.
“The decision by the Reserve Bank of Australia today to cut the cash rate down to 10 basis points and to target the three-year bond yield at 10 basis points complements the economic support that the Morrison government has provided the Australian economy.”
“The Reserve Bank made it very clear in their statement today that their moves today complement what the Morrison government announced in this year’s budget, particularly supporting job creation and our economic recovery,” Mr Frydenberg concluded.
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