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Unemployment won't hit 10% after all, Treasury admits, as it says the blow to the economy won't be as bad as expected
Australia's labour force is looking like it's in better shape than thought, as Treasury downgrades its unemployment forecasts.
Originally expecting it to hit 10% by the end of June, Treasury Secretary Stephen Kennedy told a Senate committee his office had been "steadily revising down our expectations of the hit to the economy".
Instead unemployment should only hit 8%, although there are reasons to suspect the headline figure is not the best economic indicator.
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The Australian government has quietly revised its economic forecasts following fears unemployment would soar as a result of the coronavirus crisis.
Speaking to the special Senate committee on COVID-19, Treasury Secretary Stephen Kennedy said the economy was in better shape than had initially been predicted.
"We have been steadily revising down our expectations of the hit to the economy ... I think the unemployment rate won't go as high as previously thought," Kennedy told the public hearing.
Treasury had previously forecast unemployment to hit double digits, consistent with what the Reserve Bank of Australia, as well as major bank economists had expected.
"I think the unemployment rate by September will likely to be in the order of 8% so we will see the measured unemployment rate rise."
Kennedy cited the early relaxation of government restrictions on businesses as an indication the economy was faring better than early predictions.
If the 8% figure is to bear out, it would undershoot what was seen during the last two recessions in the 1980s and 1990s, when unemployment cleared 10%. It is still expected to see the largest single quarterly contraction since the Great Depression, however.
The latest read of the labour force last month showed unemployment had underwhelmed, rising to 6.2% as hundreds of thousands simply 'left' the workforce altogether and underscoring that the headline figure may no longer be the best reflection of reality.
Either way, it's a sign that there's at least some light at the end of the tunnel.
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