Australians have been told to brace for a bumpy road to economic recovery as authorities struggle to contain outbreaks of the coronavirus.
The Reserve Bank of Australia kept interest rates at a record low 0.25 per cent after meeting on Tuesday.
RBA Governor Philip Lowe says despite signs of gradual improvement, the nature and speed of Australia’s economic rebound remains highly uncertain.
Dr Lowe says the uncertainty about the health crisis and future economic strength is making many households and businesses cautious.
The pandemic is also prompting many firms to reconsider their business models.
“As some businesses rehire workers as demand returns, others are restructuring their operations,” he said.
More than 800,000 people have lost their jobs since March.
Many others have only stayed in work because of government supports like the JobKeeper wage subsidy.
Dr Lowe said the Australian economy was experiencing its biggest contraction since the 1930s.
“It is likely that fiscal and monetary support will be required for some time,” he said.
Shadow treasurer Jim Chalmers seized on his remarks, urging Prime Minister Scott Morrison to bring forward the release of the JobKeeper review, which is due on July 23.
“This is very damaging for businesses and their workers who are already dealing with necessary new restrictions,” Dr Chalmers said.
There are 1.6 million people on JobKeeper or the doubled JobSeeker dole.
Government Services Minister Stuart Robert said preparations were “absolutely” being made for when the temporary payments expire in September.
“As JobKeeper starts to slowly come off … we need to be prepared for more Australians to come on the (JobSeeker) payment,” Mr Robert told the National Press Club.
“If they don’t come on, superb, but the nation can be assured that Services Australia will not be flat-footed on this.
“It will have the capability, the people and resourcing to deal with any increase should it arrive.”
Consulting firm PwC is eyeing off changes to the GST as it plots a path to economic recovery.
It has released new modelling showing increasing the GST to 12.5 per cent could raise more than $14 billion a year.
Expanding the consumption tax to five exempt categories – fresh food, health, education, child care, and water and sewage – would raise another $21 billion.
In releasing the modelling, PwC said tax reform would be critical to recovering from the coronavirus-led economic recession, arguing the GST was ripe for the picking.
“Increased use of GST is an obvious option to consider to make the overall tax mix more efficient,” its report said.
The firm acknowledged changing the GST would adversely impact low-income earners, who spend a greater proportion of their households incomes to meet everyday needs, and they would need to be compensated.