Reserve Bank of Australia governor Glenn Stevens has confirmed growing suspicions that the peak in the jobless rate will be well below the rate of 8.5 per cent forecast by Treasury.
“Chances are now that the peak is going to be noticeably less than that,” Mr Stevens told the House of Representatives economics committee meeting in Sydney on Friday.
“The chances are now we are not going to get the eight and a half per cent peak in unemployment.
“I don’t think the rise in unemployment being smaller than expected so far is just because of sharing the work around, it is also the case that the weakening in economic activity has not been as great as thought at one point.”
The May budget papers showed Treasury expects the unemployment rate to peak at 8.5 per cent in 2010/11.
“I know that was the government’s forecast and our own forecast at that time was probably wouldn’t have been all that different,” Mr Stevens said.
Mr Stevens said the labour market had been “considerably softer” but it’s not as bad as it was during the recession in the early 1990s.
Mr Stevens also said the rise in the unemployment rate so far had been smaller than what was feared a few months ago. It had hit a low of four per cent in February 2008.
“The labour market has seen considerably softer conditions but there has been little decline, yet, in overall employment,” Mr Stevens told the House of Representatives economics committee meeting in Sydney on Friday.
“The rise in unemployment to date looks smaller than had been feared just a few months ago.
“Several commentators have pointed out that there has been a significant fall in hours worked as there usually is in downturns.
“At this point, the fall in hours worked looks larger than what occurred in 2001, but not as large as in 1991.”
Australian Bureau of Statistics data released last week showed the unemployment rate in June was 5.8 per cent, and steady from May.
But full-time employment fell by 16,000 to 7.590 million in the month and part-time employment was up 48,200 to 3.203 million.
Mr Stevens also said the fall in working hours seen during the economic downturn was characteristic of the “shallow” recession Australia was experiencing.
“Compared with some earlier cycles, the reduction in hours has occurred via a reduction in working hours across more people, rather than being concentrated among a group of unemployed,” Mr Stevens said.
“In fact, that is probably a reasonable characterisation of this downturn in general.
“On the basis of the information to hand at present, this may well turn out to be one of the shallower recessions Australia has experienced.”