Australia’s unemployment rate is predicted to peak at more than 9.25 per cent this December, after reaching a 19-year-high at 7.4 per cent in June this year.
Federal Treasurer Josh Frydenberg unveiled the prediction during the Government’s July economic and fiscal update on Thursday.
“One of the largest impacts of this crisis is its effect on the labour market,” Frydenberg said.
“Between March and May, 870,000 jobs were lost, and more than 1 million Australians saw their working hours reduced – in many cases, to zero.
“These are mums and dads, sons and daughters, friends and colleagues.”
Without the government’s economic support measures, Frydenberg said the unemployment rate would have been around five percentage points higher.
The Government expects further increases in the unemployment rate, likely driven by rising labour force participation as those who dropped out of the market at the start of the crisis begin to look for work again as the economy opens up.
Also read: Budget update: Winners and losers
The jobless rate will begin to gradually decline from the start of 2021, and will drop to around 8.67 per cent in the June quarter next year.
While the official unemployment rate is currently 7.4 per cent, Frydenberg noted the “effective” unemployment rate is likely at 11.3 per cent.
That’s because the official rate takes into account those who are unemployed but looking for work, while the effective rate measures the amount of people who are working zero hours or have left the workforce entirely.
However, Frydenberg predicts the two figures will begin to converge.
“They’ll start to converge as restrictions are raised; less people will be on zero hours, more people will be going back to work. But the official unemployment rate will continue to rise throughout the course of the year.”
And those in Victoria may be hardest hit, with the state’s treasurer Tim Pallas revealing 200,000 Victorians will be out of work by September.
“These predictions aren't quite as grim as those in April, but, of course, there's no solace to the many thousands of Victorians who would be feeling the direct and immediate impacts of these changes upon them,” Pallas said.
What about young Australians?
The Government’s economic update stated the most significant impact of the crisis had been on jobs, particularly for young Australians.
But the Federal Treasurer says things are looking up.
“The good news is that in June, 48 per cent of the jobs that came back were for people aged 15 to 24, and that is a very positive sign,” he said.
“The sectors that were hardest hit included the retail sector, the hospitality sector and the recreation secretary, so gradually as restrictions are raised, people are coming back into those sectors...and that means young people.”
Frydenberg also pointed to the government’s skills and path initiatives, as well as the apprentice and trainee wage subsidy, which would help young people get back into the workforce.
Are you a millennial or Gen Z-er interested in joining a community where you can learn how to take control of your money? Join us at The Broke Millennials Club on Facebook!