Unemployment in Australia could reach 11% by June, according to Westpac chief economist Bill Evans, up from its original forecast of 7%, in light of the “extraordinary times” for the economy.
Last week, the firm said it expected unemployment would peak at 7% but, in light of the increased business shutdowns, the firm had revised up this forecast to 11% by June. This accounted for 814,000 jobs lost.
The current unemployment rate in Australia was 5.2% and it had a historic average of 6.2% dating back to 1978.
The sectors most affected would be accommodation and food services, retail, arts and recreation, manufacturing, transport and warehousing, real estate, construction and professional services.
“We estimate that there will be 814,000 in job losses in the June quarter lifting the unemployment rate to 11.1%. Working through our gross domestic product [GDP] estimates on an industry basis and acknowledging that output is not always aligned with employment, this approach points to a contraction in GDP of 3.5% in the June quarter.
“Net additional job losses are expected to be minimal in the September quarter but little progress is expected to be made in reducing the unemployment rate. We expect it to hold at 11% while GDP is expected to contract by a further 0.3%.”
In the December quarter, Westpac said it expected business shutdowns would have ceased which should lead to a bounce back of 350,000 jobs which would cause unemployment rate to drop down to 8.8%, although sectors like manufacturing, construction and retail would still face headwinds.
Evans acknowledged the move from the current rate of 5.2% to 11.1% and then back down to 8.8% would be a “rapid recovery” for the economy. There would also be sectors which would be increasing employment such as healthcare, public administration and telecommunications.
“This is a more rapid recovery than we have seen in previous recessions but we recognise that the circumstances are quite different.
“As this recession will hit services much harder, the loss in jobs will be much quicker, but so too can the rebound be much faster, all dependent on how many firms remain solvent.”