Jobless forecast looks a bit sick
A top economist predicts unemployment could soar to 7 per cent by year's end due to a coronavirus-induced recession.
That's a level not seen since 2001 and means that nearly a quarter of a million people would be forced out of their jobs in less than 10 months.
AMP chief economist Shane Oliver also said Australia was more likely to enter a recession than much of the rest of the world because we have felt the impact from China through much of this quarter and will bear the brunt of the global impact in the next.
Much of the rest of the world is only beginning to feel the economic effects of COVID-19 now.
A recession is defined as two consecutive quarters of economic contraction.
"If we go into a recession … and then don't recover until later in the year then that will probably push the unemployment rate up to 7 per cent," Dr Oliver told The Saturday Telegraph.
That would put an extra 235,000 people out of work.
The unemployment rate is currently 5.3 per cent. The last time it was 7 per cent was immediately after the terrorist attacks on the World Trade Centre in 2001.
The chances of a recession have risen to now be a 55 per cent likelihood, in Dr Oliver's estimations. "We are almost at the point that a recession is on the way," he said.
Australia hasn't had a recession in nearly 29 years - which is a world record for a developed nation.
Reserve Bank of Australia and Treasury officials this week told Senate hearings that a contraction in this quarter appeared on the cards.
Westpac chief economist Bill Evans said the present hit was mainly via Australia's relationship with China, with exports and international student numbers down.
"The second quarter (of 2020) will be about how the economy responds to its own coronavirus problem," Mr Evans said, including the impact on consumer and business confidence.
Mr Evans is yet to make a call on whether Australia will enter a recession and is currently revising his outlook for unemployment to take account of the latest coronavirus implications.
Deutsche Bank chief economist Phil O'Donaghoe expects there will be a two-quarter recession.
However, he forecasts the unemployment rate will only reach 6 per cent. That would still lead to an increase in joblessness of 97,000 this year.
Mr O'Donaghoe forecasts a $25 billion budget deficit this financial year. Before COVID-19 the government had been projecting a surplus of $5 billion.
Mr O'Donaghoe anticipates a deficit of $5 billion in 2021-22 and a surplus the year after, based on "aggressive stimulus" from Canberra - if it happens now. "It's the right thing to do," he said.