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Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)
Josh Frydenberg is confident the unemployment rate can remain relatively low, even with the significant economic shock of having the nation’s two most populous states in lockdown.
In an address to an online forum on Monday, the treasurer also said he did not share concerns of an inflation spike as central banks around the world provide support by pumping liquidity into their economies.
The coronavirus lockdowns in NSW and Victoria, along with the shutdown in the ACT, are expected to result in a large economic contraction in the September quarter, with some economists forecasting a downturn of as much as four per cent.
They also expect a rise in the unemployment rate back above five per cent.
“But we have seen with previous lockdowns and the subsequent opening up or easing of restrictions is that people have got back to work very quickly,” Mr Frydenberg told the ANU Crawford Leadership Forum.
“So I’m confident that we can keep the unemployment rate relatively low.”
He pointed to the most recent labour force figures, which showed the unemployment rate unexpectedly falling to 4.6 per cent in July – a 13-year low. They also featured a spike in hours worked in Victoria after the state reopened from its previous lockdown.
The latest in ANZ’s job advertising series – a pointer to future hiring intentions – eased 2.5 per cent in August after a downwardly revised 1.3 per cent fall in July, due to the current spate of lockdowns.
However, ANZ senior economist Catherine Birch said the decline in job ads over two months has been minuscule compared to the 64 per cent plunge during last year’s national shutdown.
“It is likely that ANZ job ads will decline further over coming months and we expect sizeable employment losses in locked down areas, with the national unemployment rate to lift back above five per cent,” she said.
“But given the momentum going into lockdowns, policy support and signs that activity should rebound once restrictions ease, we think the setback will be temporary.”
The Reserve Bank of Australia will hold its monthly board meeting on Tuesday, when it is expected to leave the cash rate at a record low 0.1 per cent.
The central bank has repeatedly said it will not lift the cash rate until inflation sustainably returns to the two to three per cent inflation target, an event it does not expect to occur before 2024.
The consumer price index did spike to an annual rate of 3.8 per cent as of the June quarter. However, this was seen as only temporary as stimulus measures that were introduced during the depths of last year’s recession were unwound.
Global markets have been jittery for some time about an inflation spike, but the treasurer does not share that worry.
“I’m not overly concerned right now as to where … the Australian inflation rate is at given that it is been below the band for some time,” Mr Frydenberg told the forum.