Around 640,000 more Australians could lose their jobs by March 2021, adding to the 740,000 jobs already lost before June this year, new data has revealed.
As a result of six key factors, with the “most significant force” being the closure of international borders, the economic shock of the coronavirus will see the unemployment rate skyrocket between June 2020 and March 2021, a McKinsey & Co report has found.
These international border closures and the lack of migration triggered a significant decline in consumer spending.
That, combined with lockdown restrictions and stagnant wage growth, has put extreme pressure on business health, leading to decreased investment, more business failures, fewer new entrants and less innovation.
But while hundreds of thousands of Australians will most likely be out of work, not all industries will be hit equally.
For example, the tourism industry has been hit hard by Covid-19 restrictions, but is well-placed to recover once the pandemic passes, the firm found.
In saying that, McKinsey expects it to be “hard” for the tourism industry to return to its pre-coronavirus scale, with arts venues copping the brunt of the blow.
“Others, such as construction, will be protected from these direct effects but will still be indirectly exposed to the crisis via business-cycle effects or structural changes,” the report said.
Some more “fortunate” industries, like technical services, will start recovering once the immediate effects of the lockdown start to fade.
And some, like retail, will be changed forever.
“Stay-at-home rules and directives to minimise physical interactions have prompted many experiments in online retail—including novel initiatives and new product categories,” the report stated.
“As sales shift online, the employment profile of Australia’s retail industry is expected to change permanently, as fewer customer assistants will be required to deliver each dollar of revenue.”
The report follows claims from the Victorian Chamber of Commerce and Industries (VCCI) that 250,000 more Victorians would lose their jobs as a result of the Stage Four lockdown restrictions.
“We know that for us to get into a position again where we talk about recovery, the health crisis needs to be brought under control...But the cost of the actions to get to that point will be devastating and long-lasting, with the effects felt by all of us for many years,” VCCI chief executive Paul Guerra said.
The Victorian unemployment rate alone was predicted to peak at 9 per cent in September prior to the new restrictions. Now it is expected to surge past that.
Who will be hit hardest?
Areas of Australia that are highly dependent on tourism, retail, hospitality and construction will be hardest hit, the report found.
That means some coastal tourist towns could see unemployment rise above 10 per cent in the period between September 2020 and March 2021.
But those in metropolitan areas won’t be unscathed; two-thirds of jobs at risk are located in the central business districts of capital cities.
The towns reliant on domestic travellers, like South Australia’s Barossa Valley and Kangaroo Island, will fare far better, as they are “significantly insulated” from the sharp decline in international tourists.
And there are some interesting effects across generations, too. Gen Z-ers, along with millennials, are the least confident of economic recovery, the report found – and with good reason.
Across all industries, 15 to 19-year olds are almost twice as likely to lose their jobs as 40 to 49-year olds.
The report also found that lower-income workers are expected to be twice as likely to be out of work than high-income earners.
What can the Australian Government do?
Tailored policy solutions will be key to helping workers retain their jobs, or at least cushion the blow, McKinsey & Co found.
“For example, in the arts and recreation sector, redesigning COVID-19 restrictions to allow arts performances or sporting events to safely occur could be more effective than offering incentives for capex investment,” the report stated.
“Similarly, policy makers will need to be clear-eyed about the automation and digitisation shifts sweeping through industries and help firms adapt rather than protect unsustainable business models.”
That might mean state governments will need to look at the tertiary education sector to support reskilling employees.
Economists argue that the government needs to increase its fiscal stimulus, with JobSeeker and JobKeeper simply not going to cut it.
Read next: The jobs that will boom, and bust, in 2021
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