The economic impacts of the coronavirus shock are occurring faster than they did during the Great Depression, and Australia may not ever return to business as usual.
According to Treasury Secretary Steven Kennedy, new real-time ABS data shows that employment in accommodation and food services and arts and recreation services fell by 25.6 per cent and 18.7 per cent respectively over the three weeks from 14 March to 4 April. Unemployment is now expected to rise to 10 per cent.
“Unemployment rose to higher levels in the Great Depression, but it did that over the course of a couple of years,” Mr Kennedy told the select committee on COVID-19. “These movements are happening in just a couple of months. We have never seen an economic shock of this speed, magnitude and shape, reflecting that this is both a significant supply and demand shock.”
While the final shape of that shock remains “hard to predict”, Mr Kennedy anticipates that economic activity will resume as uncertainty around the virus diminishes. But the nature of the Australian economy could well change, even as it returns to business as usual.
“New challenges will have emerged,” Mr Kennedy said. “Some jobs and businesses will have been lost permanently. The Treasury will increasingly turn to these challenges, continuing to advise on policy settings and reforms that will enable our country to prosper in a world that in many ways will look largely the same, but may have also changed in some important and sustained ways.”
The government has so far unleashed $320 billion in stimulus spending, equating to around 10 per cent of GDP – larger than any support package provided by an Australian government in the past 50 years. Ten billion dollars has been distributed over the past three weeks, with around three times that amount expected in the next month.
Australian governments have substantially lessened the economic impact of the social distancing measures by acting decisively and early,” Mr Kennedy said. “They have collectively taken a balanced approach to preventing activities likely to spread the virus while allowing other activities to continue where possible. This has meant that in Australia we have been able to continue a wider range of economic activities, such as construction, manufacturing and mining.”
While the “high degree of uncertainty” has delayed the 2020-21 budget until 6 October, Treasurer Josh Frydenberg will provide a statement to the House of Representatives and the Minister for Finance on 12 May, outlining the impact of the coronavirus on the economy and the government’s actions.
The government will also provide an economic update on the economic and fiscal outlook in June, following the release of the March quarter national accounts.