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This is Australia's 2020 Depression

Stephen Koukoulas
·4-min read
An unemployment queue during The Great Depression, with Scott Morrison and Josh Frydenberg in inset.
Stephen Koukoulas says Australia is now in a depression. (Images: Getty)

832,490 people unemployed.

1,816,080 people underemployed.

554,400 additional people have given up looking for a job with the workforce participation rate diving 2.5 percentage points in the last two months.

This totals 3,202,970 people.

This is a truly shocking 24.2 per cent of the April labour force.

Welcome to the depression and the horrors of an economy that is in free-fall.

The April labour force data confirms what was evident several weeks ago as the queues formed around Centrelink offices and the MyGov website failed – as huge parts of the economy were closed down to deal with the COVID-19 health crisis.

Taken together, the unemployment and underemployment rates total 19.9 per cent of the workforce.

This is about as bad as the weakest point for the economy during the 1930s Great Depression where the unemployment rate peaked just below 20 per cent. (There were no data on underemployment at that time.)

While parts of the economy are slowly being reopened which will help some people regain paid work, it is clear that there are many months – perhaps years – of economic pain to endure before we get back to the position pre-COVID-19, where the unemployment rate was 5 per cent and the underemployment rate was 8.5 per cent.

The latest Reserve Bank forecasts are for the unemployment rate to still be 6.5 per cent in the middle of 2022. It has not made a forecast for underemployment but even the drover’s dog knows it will be near 10 per cent at that time.

This is not good enough. In fact, it is an economic disaster.

And it must be remembered that the economy was floundering even before the COVID-19 crisis hit.

Data released this week showed annual wages growth slowing to just 2.1 per cent in the March quarter, to be at a rate below inflation.

If you felt your personal financial position was under pressure before the health crisis, you were probably right because real wages were falling.

The financial pain for most of the population will be more extreme when the June and September quarter data are released in the months ahead.

Has the government done enough?

As has been evident for some time, the Morrison government’s economic stimulus and support measures have been slow to impact the economy – and they have been stingy.

Look at the human cost in the labour market data and judge whether the government has spent too much or too little?

This begs a question about policy settings and whether they are appropriate.

There can be little doubt the government needs to do more to underpin the economy while the crisis is still unfolding, and then deliver stimulus measures to lock in a decent and sustained growth spurt as the COVID-19 pressures pass.

Getting cash into the economy should be the simple goal.

Keeping payments to those people out of work and looking to rejoin the labour force is vital.

Spending on programs that not only help the economy to grow but give a boost to the businesses that provide goods and services is another easy option.

The list of what can be done, by the government, is long.

Think of the benefits to society if the government were to commit to the provision of low cost renewable energy to households and business?

Build desalination plants and dams to ensure the bulk of Australians never have to worry about running out of fresh water ever again.

Building affordable housing, well serviced by public transport.

Giving the workforce the skills and education needed to be successful in the 21st century.

These few items alone would provide a boost to the economy over many years.

There is also a case for maintaining decent levels for JobSeeker and JobKeeper payments. This keeps a flow of cash into the economy, helping the business sector to maintain profitability and employment levels.

The economy is in a deep slump and millions of Australians are suffering in this downturn.

More policy stimulus is needed to not only help those in need but also to engineer an era of strong growth to the point where everyone who wants a job has a job.

We are about 3 million people away from that goal.

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