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Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)
Treasury chief Steven Kennedy believes few countries have achieved what Australia has in responding to last year’s recession – relatively good health outcomes, smaller economic impacts and now, rapid recovery.
“By any measure, Australian governments have struck the right balance,” Dr Kennedy told senators in Canberra.
“Our outcomes have been world leading, both in the health and the economic sphere.”
He said the economy has now recovered 85 per cent of the decline from its pre-COVID level of output.
“Growth will now begin to moderate as we move past the initial phase of the recovery,” he told a Senate estimates hearing on Wednesday.
“While the economy is recovering strongly, well supported by fiscal and monetary policy settings, we are well below our pre-pandemic economic growth path and it will take some time to fully recover.”
He said the peak in unemployment now appears to have passed following strong jobs gains in recent months.
In the mid-year budget review released in December, Treasury had predicted unemployment peaking at 7.5 per cent in the March quarter.
Instead, the unemployment rate has steadily fallen, dropping to 5.8 per cent in February.
“Nonetheless, while outcomes to date have tended to surprise on the upside, there is still significant spare capacity in the labour market,” Dr Kennedy said.
Treasury now puts full employment at between 4.5 per cent and five per cent, compared with five per cent previously.
New figures show there remains strong demand to hire staff, with job advertisements posted on the internet jumping by a further seven per cent in February to be 24.8 per cent over the year.
This is the 10th straight monthly rise in job ads, as compiled by the National Skills Commission, after striking a record low in April 2020 amid last year’s recession.
Job ads grew in all eight broad occupational groups monitored by the commission, while recruitment activity increased across all states and territories.
But Dr Kennedy expects the number of people defined as being in long-term unemployment – those who have been looking for, but been without, paid work for a year or more – will jump in coming months.
“This reflects the flow-on impacts of the spike in unemployment at the onset of the crisis in March and April last year,” he said.
Turning to housing, the recent rise in house prices has yet to raise concerns at Treasury.
Deputy secretary of Treasury’s macroeconomic group Luke Yeaman said the department is watching developments in the housing market closely, but at the moment rises were seen as a sign of strength in the economy.
“It’s working to help drive the broader recovery across the economy,” Mr Yeaman told the hearing.
He said what may raise concerns are signs of “froth” in the market or changes in lending practices or other risks.
“We are not seeing any signs of that at the moment,” he said.
Meanwhile, Australia recorded its third consecutive goods trade surplus above $8 billion for the first time in history.
Preliminary trade figures show exports grew by two per cent in February, buoyed by a record $1.3 billion of cereals exports, which helped offset a 12 per cent decline in iron ore shipments to China.
The Australian Bureau of Statistics said imports also grew by two per cent, led by a 24 per cent increase in road vehicle inbound shipments.