As recorded in the Reserve Bank of Australia’s (RBA) March monetary policy meeting minutes, there has been a rise in employment, with the rate gaining to around 0.5 per cent below its pre-pandemic level.
The unemployment rate estimated by ABS sat at 6.4 per cent in January, further declining from 6.6 per cent in December and 6.8 per cent in November.
“However, in the near term there was some uncertainty relating to the effect that the end of the JobKeeper program would have on labour market conditions,” the minutes noted.
“There was limited international experience to draw on in this regard; New Zealand had been the only country to have wound down its wage subsidy program and very few people had been reliant on it when that program ended. Members also noted that a durable recovery from the pandemic would require a strong and sustained pick-up in business investment.”
Yet, the end of JobKeeper resulting in a sustained increase to unemployment is seen as unlikely. The number of people working zero hours in Australia is crawling towards pre-pandemic levels, while some JobKeeper recipients, including the self-employed, are more likely to cop a fall in income than lose employment.
Liaison contacts have informed the RBA that many companies that received JobKeeper had already reduced the size of their workforces and were not planning on a further round of lay-offs.
But the possibility remains that some jobs will be axed without the subsidy.
“Members also took note of the increases in forward-looking indicators of labour demand, such as job advertisements and vacancies,” the RBA minutes detailed.
“These indicators had suggested that the ongoing recovery in labour market conditions could be broadly sufficient to offset the job losses arising after the end of the JobKeeper program.”
Wages growth, at 1.4 per cent over the year to the December quarter are expected to remain low, until unemployment is reduced materially. Such a cut to unemployment would be needed to generate wages growth in excess of 3 per cent, which in turn would be required to ensure inflation is in the RBA’s target range of 2 to 3 per cent.
Looking internationally, the global economy is expected to regain momentum in the coming months, as developed countries are likely to achieve widespread inoculation and the US gains further fiscal support.
“Members agreed that the prospects for a sustained global economic recovery were better than a few months earlier although the path ahead was likely to remain bumpy and even,” the minutes noted.
The RBA is also forecasting that the US Congress will pass another significant stimulus bill in the near-term, calling the outcome “highly likely”, but fiscal settings in some other economies are expected to turn less accommodative in the second half of the year.
The cash rate at its record low of 0.1 per cent, is still unlikely to shift, with RBA members refusing to sway until its inflation target range comes to realisation.
But as indicated before, the inflation, wages growth and employment conditions are not expected to hit their targets until 2024 at the earliest.
