Australia’s central bank boss and prime minister have warned more people will lose their jobs even as the economy reopens, with businesses now assessing the damage from the coronavirus recession.
However, Reserve Bank governor Philip Lowe says the government need not be scared of going into debt to help people.
If it doesn’t, it risks leaving the nation with severe economic scars.
These include young people never managing to get on the jobs ladder, and people losing out on training opportunities and damaging their long-term prospects.
“We need to do what we can to limit the severity of these costly scars. These scars have long-term effects and they damage our society and our economy,” Dr Lowe said in a speech on Tuesday.
The drop in jobs and hours was staggering, but it was smaller than expected, and many firms were now rehiring as coronavirus restrictions ease.
But Dr Lowe said other sectors, such as construction and professional services, were facing troubled times as their pipeline of work dried up and new orders fell.
Others were reconsidering their business models, dealing with a drop in demand or looking anew at how to manage their workforce.
“Restructuring and the uncertainty about future demand is likely to weigh on the labour market as it recovers.”
Prime Minister Scott Morrison also pointed to the expectation more jobs would be shed in the latter part of the year amid changes to the JobKeeper wage subsidies program.
“I would expect businesses, several months into the pandemic, to be making their own decisions now about those who are going to be continually working in their businesses,” Mr Morrison said.
“They will make judgments about who they’re going to keep on and then who they won’t be able to keep on.”
Dr Lowe said the government’s JobKeeper and increased JobSeeker unemployment payments were important to keeping confidence in the economy.
But they required the government to borrow against the nation’s future income in order to smooth out the hits to its current income.
“For a country that has got used to low budget deficits and low levels of public debt, this is quite a change,” he said.
“But it is a change that is entirely manageable and affordable, and it’s the right thing to do in the national interest.”