Extract from The Guardian
Grogonomics Australian economy
Aside from some areas in Melbourne and Sydney, Cairns had more businesses still accessing jobkeeper than any other area in the nation
Last modified on Tue 30 Mar 2021 03.33 AEDT
The end of jobkeeper this week comes at a time when the economy is still undergoing massive adjustment from the pandemic. While the government believes it is merely removing a temporary safety net, for some areas, such as Cairns, the impact is more akin to having the rug pulled out from under their feet.
Yes, the economy is doing better now than a year ago. The unemployment rate of 5.8% in February is very healthy given what has occurred over the past 12 months. But it remains a bit too early to suggest things are settled into a nice pattern.
The unemployment rate itself is a good indicator of how weird things remain.
Far from being a natural return to previous levels, the 0.5% percentage points fall in February was the second biggest fall ever recorded (the biggest occurred last August):
Graph not displaying? Click here
It is hard to say whether the big drop in February will lead to the same situation because last year involved so many changes due to policy and lockdowns that it is hard to parse any future moves from those of the recent past.
But the strong likelihood is that next month the unemployment rate will rise, because this week has seen the end of the jobkeeper program.
This quasi wage subsidy program was still being accessed by more than 370,000 firms in January according to the Treasury, and about 1.5 million workers.
It is hard to work out the impact given that last October, when jobkeeper was first reduced, there was a greater number of firms that stopped accessing the program than is the case this week:
And yet despite the big drop in numbers of firms (and thus employees) accessing jobkeeper, employment grew last October, and unemployment rose only slightly – due mostly to a big jump in the numbers of people re-entering the labour force.
But we can’t tell too much from that because at the same time, Victoria was ending its lockdown. So we had a flood of people back into work and back looking for work.
We also saw a big jump in the number of hours worked per capita, which was then followed by a big fall in January due to New South Wales restrictions, and then a big rise again in February when they were eased:
Graph not displaying? Click here
So nothing entirely sensible has occurred in the past 12 months that gives anyone much of a clue about how big the impact of the end of jobkeeper will be.
One area that is most worried about the impact is Cairns. Aside from some areas in Melbourne and Sydney, Cairns had more businesses still accessing jobkeeper than any other area in the nation.
In January, 1,395 businesses in Cairns were accessing the program, just above the 1,330 in Surfers Paradise:
It’s not surprising those two areas are among the biggest recipients of jobkeeper given their dependence upon tourism, which has been destroyed by the pandemic.
But as Cairns is around a quarter the size of the Gold Coast, it is clear that the end of jobkeeper is going to have a materially bigger impact there than in the surrounds of Surfers Paradise.
As it is, the employment situation on the Gold Coast is actually better now than a year ago, whereas in Cairns it remains much worse – about 12% down on February last year:
Graph not displaying? Click here
The different impact of jobkeeper perhaps can be seen by the fact that in October last year, employment in Cairns fell 1.6% and then a further 6% in November, while it rose nearly 7% in October on the Gold Coast.
It doesn’t help that a scheme designed to help businesses and workers through periods of a lockdown was removed on the very day that the Queensland government announced a lockdown of the greater Brisbane area and many states have closed their borders to visitors from Brisbane.
The head of the Treasury, Steven Kennedy, told the economic budget estimates committee last week that it expects between 100,000 to 150,000 workers to lose employment due to the end of jobkeeper.
It’s easy to get lost with big numbers, so for some context, prior to the pandemic the biggest ever one-month drop in employment was in 1992 when 74,889 people lost jobs.
So we are talking about a massive shock to the economy, even if it is nowhere near the 606,000 who lost work last April.
It would represent nearly 1% of all Australian adults losing work in a month and take the employment rate back to where it was in 2017:
Graph not displaying? Click here
The end of the jobkeeper program is the beginning of the removal of the economic safety nets that have been in place for the past 12 months. As a result, we will start to see the true strength of the economy.
Overall the impact looks set to be historically large, even if not so in the context of the past year. But in places more highly dependent upon the scheme – such as Cairns – the impact is likely to be significantly larger.
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