JobKeepers payment to reduce peak unemployment rate from 17% to 9%: Westpac's Bill Evans

EXPERT OBSERVER

Events have been moving quickly in the Australian economy.

With the announcement of the Australian Government’s latest JobKeeper Payment (JKP) policy and further tightening of social distancing guidelines we have reviewed our employment, GDP, and Budget deficit forecasts.

Key forecasts had been: a peak in the unemployment rate of 11.1% in the June quarter; a GDP contraction of 3.5% in the June quarter; and the likely issuance of an additional $250bn in Australian government bonds over 2019/20 and 2020/21.

In reviewing those forecasts we have maintained the approach of assessing employment and output across industry sectors to arrive at a more granular estimate of the impact of the various government policies on the Australian economy.

We also maintain our core view that while the intensity of the policies to address the virus will peak near the end of the June quarter, most policies will be maintained through the September quarter and the recovery will be delayed until the December quarter. Conditions in the global economy will remain very weak until well into the December quarter.

With the shutdowns and social distancing policies being tightened we now expect a much more severe impact on the output of most industries.

As expected, the most seriously affected industries are likely to be: retail; accommodation; restaurants; transport; recreation; and real estate. However we also expect negative impacts for other industries including manufacturing; construction; and distribution. Other industries such as health, government, and telecommunications will see a lift in employment and output.

We expect GDP will now contract by 8.5% in the June quarter; to be followed by a 0.6% contraction in the September quarter; and a 5.2% lift in the December quarter.

Overall, the economy is expected to contract by 5% through the 2020 year.

BILL EVANS is the Chief Economist at Westpac