The government is forecasting 338,000 workers gain employment over 2020-21, following a loss of 703,000 workers between the March and June quarters of calendar 2020.
But given employment in August was already 294k higher than the June quarter average, this means there would be a net rise of just 44,000 over the remainder of the fiscal year. This suggests the government may be expecting net employment losses over the coming months, as JobKeeper and other fiscal support is wound back, before it improves again.
Ultimately, Treasury is not forecasting employment to return to its pre-pandemic level until 2023-24, the final year of the forward estimates.
The $A4 billion JobMaker hiring credit is intended to encourage businesses to hire 16 to 35 year olds on JobSeeker and is expected to “support” 450,000 positions but it is unclear how many of these would be additional.
The Budget also included $A1.2 billion for 50 per cent wage subsidies available for businesses hiring new apprentices and trainees.
The Treasury now expects the unemployment rate to peak at 8 per cent in the fourth quarter before gradually falling to 6.5 per cent by June 2022. But it is not forecast to get “comfortably” back under 6 per cent until 2023-24. This is when the government intends to turn its focus to repairing the fiscal position.
Treasury’s forecasts for wages are in line with the RBA’s but stronger than ANZ Research’s. But with so much spare capacity in the labour market – both unemployment and underemployment – it will be difficult to achieve wages growth of even a modest 1.25 per cent.
The Budget does not materially change ANZ Research’s view on the economic outlook. The spending measures are a little less than expected, particularly on the infrastructure side, but the investment incentives are larger.
Rather than lift public spending further, the Government is clearly endeavouring to engineer a private sector recovery, with particular emphasis on investment. It will mean the mix of growth will be more tilted towards the private sector than previously expected.
Cherelle Murphy is Senior Economist, Felicity Emmett is Senior Economist, Catherine Birch is Senior Economist and David Plank is Head of Australian Economics at ANZ