- According to latest update by ABS, job vacancies fell by a record 43% between February and May while the average household wealth dropped by 2.3% in the March quarter 2020. Arts and recreation services were hardest hit with a 95% fall in vacancies whereas, Accommodation and food services industry witnessed a drop of 66% in the same period.
- ABS further stated that employment levels fell by 6.5%, decreasing by 800,000 people while total hours worked have fallen by 9.4% since February.
- In its June update, IMF stated the requirement of gradual exit from targeted support to be an essential step to avoid sudden losses in incomes and bankruptcies throughout economies.
As per the figures released by ABS, on 25 June, job vacancies posted a record decline over past 3 months, the average household wealth fell 2.3% to AU$428,585 per person in the last 3 months to 31 March, the biggest decrease in wealth since September 2011. The major drivers that overturned the household wealth gain were falling superannuation balances of 8.2% and directly held equity holdings (down 5.3%) in the December 2019 quarter.
Job vacancies fell by record number
ABS statistics further states that the number of job vacancies in Australia fell 43% in seasonally adjusted terms over the May quarter of 2020, which is the most significant fall on record. The vacancies fell by 98,200 in 3 months to May 2020.
Job vacancies in the private sector and public sector fell by 45% and 29% respectively. Though all states and territories recorded a decline in job vacancies in May, the biggest fall was in Victoria at 52%, and the lowest fall was recorded in Queensland, which was down by 34.3%.
Bjorn Jarvis, Head of Labor Statistics at ABS stated that it was the biggest quarterly fall in job vacancies over the 40 years of the survey and much above the earlier most significant drop of 27% during 1990s recession.
Employment, vacancies, and hours worked across industries fall
3 industries exposed to COVID-19 social distancing restrictions that showed the most significant drop in job vacancies were- arts and recreation services industry falling by 95% indicating closure of gyms, casinos, theatres and zoos, etc. The next highest fall was witnessed by Rental, hiring and real estate industry where vacancies were down by 68%, followed by a drop of two-thirds in the Accommodation and food services sector.
Though Australia’s biggest employment site SEEK recently showed that online job advertisements has soared by about 22% over the past fortnight reflecting some optimism. But the numbers are still less than 70% of pre-pandemic levels.
As per ABS, the employment levels fell 6.5% while total hours worked have reduced by 9.4% since February. Between February and May, the highest fall in employment was noted in Arts and recreation services (-35%) and Accommodation & food services (-31%) industries, which also witnessed the largest fall in average actual hours worked, down by 24%.
However, there were large increases in employment in electricity, gas, water, and waste services which were up by 24%, though the hours worked did not increase. Agriculture, forestry, and fishing recorded limited job increase of 9%, while financial and insurance services, as well as public administration and safety, were up by 4% and 3% respectively.
End to Job subsidy could leave many without payments
About 3.5 million Australians working at 872,000 businesses get JobKeeper support which is AU$1500 per fortnight. Companies with a turnover of less than 30% are eligible for the subsidy. However, after easing of restriction, businesses now have higher turnover, the Treasury is planning to retest them every month to be sure of their eligibility.
Companies that have shown a rebound could be cut off from the subsidy, while those who have not would continue to get JobKeeper subsidy. The AU$70 billion subsidy is set to end on 27 September, and the decision could leave millions of Australians without payments.
Qantas has been in talks with Federal Government about extending support to the ailing airlines after it announced slashing 6,000 jobs from its workforce of 29,000, pushing another 15,000 down without pay until recovery in traveller demand and cutting off AU$15 billion in costs. The airlines stated that it would not resume its international flights for another 12 months.
Alan Joyce, Chief Executive Officer of Qantas, has called on Morrison government to continue JobKeeper for hard-hit industries amid coronavirus. He urged the government for some alternative form of support after the wage subsidy ends in September.
The government is supposed to receive a review from Treasury into JobKeeper by the end of June, with a response to come in late July, with an economic statement that will involve support for the struggling sectors of the economy.
IMF suggests gradual exit from wage subsidy
As per June Economic outlook report released this week, IMF now expects a more profound economic contraction, but is also more cynical on predictions of recovery. IMF has revised its forecast of contraction of world global output to 4.9% from 3% predicted in April.
Gita Gopinath, IMF economist has put deterioration down to worse than expected outcomes during the first half of 2020, and greater damage in the long term as many businesses have gone under and permanent loss of jobs for some people.
IMF has forecasted Australia’s GDP to plunge by 4.5% in 2020 and then grow by 4% in 2021. It says that the economic outlook of Australia is amongst the second best among all advanced economies.
About 66% of the governments, worldwide have released almost AU$11 trillion to support their respective economies, with about 50% involved in direct spending and tax concession initiatives, and other 50% in the form of improved liquidity and credit support for business.
As Australian government ponders the looming end of its extraordinary support including JobKeeper wage subsidy, IMF has warned governments that a gradual exit from the targeted fiscal support is essential to avoid hastening sudden income losses, and bankruptcies as economies reopen and start taking steps towards its recovery.
The sequence in which the targeted measures are being loosened, it should take into consideration the composition of employment, the share of self-employed, distribution of firms across sectors witnessing different rates of recovery and the degree of casualness in the economy.
Moreover, policy support would need to shift towards encouraging people to return to work and making easy reallocation of workers from shrinking sectors to sectors witnessing demand increase. This might involve spending on workers training and hiring subsidies targeted at workers who face a higher risk of long-term unemployment.
The policy measures taken to support the economy needs to shift from targeted to more broad-based. The Fund’s directory comprises of investments in physical and digital infrastructure, health care systems and a shift to a low-carbon economy.