Australian jobs are under more pressure, thanks to the upturn in COVID-19 infections in Victoria and NSW; trade data though remains solid, although there’s a problem emerging in coal exports.
Imports jumped sharply in July (indicating a healthier economy) and as we learned last week, retail sales are still growing more than 12% in the year to July and by more than 3% in July).
But that hasn’t been enough to save hundreds of jobs at Mosaic Brands, one of the country’s major women’s clothing chains and Blackmores, the vitamins company (See separate stories). Qantas revealed yesterday as well that it plans to cut 2,400 jobs by getting rid of ground staff at airports.
At the same time, the impact of the lockdowns across Victoria has seen the Commonwealth Bank’s chief economist warn that the economy will take much longer to regain its pre-COVID-19 pandemic levels at the start of 2020.
Stephen Halmarick said in a note to clients that the CBA now thinks the economy won’t regain pre-COVID levels until the second half of 2022, or two years or more away.
He said that he now sees three consecutive quarters of negative growth this year and then a modest turnaround next year.
That’s a bit more gloomy than most other forecasts – the Reserve Bank in the minutes of its August policy meeting said “The recovery was, however, likely to be slower than earlier expected, with the COVID-19 outbreak in Victoria having a major impact on the economy. Uncertainty about the health situation and the future path of the economy was continuing to affect the spending plans of many households and businesses.”
And the National Australia Bank and the AMP’s Shane Oliver are both seeing a slower rebound and a much longer time for the lost growth to be regained.
Mr. Hamarick sees the 0.3% contraction in the March quarter followed by minus 6% rate in the June quarter (we find out about that a week today in the June quarter’s national accounts) and then a minus 0.7% September quarter. By then the annual growth rate will be a fall close to minus 6.5%.
The last time Australia experienced such a poor economic outcome was during 1982-83 recession when the economy contracted for four consecutive quarters.
The CBA is forecasting the economy to shrink by 4.2% through 2020 and then edge up by 1.8% in 2021. Growth of 2.9% is expected in 2022, with the stronger part of that in the final six months of that year, according to the CBA.
Mr. Halmarick said “Compared to most other nations, Australia has been very successful in controlling the spread of COVID‑19 and the policy response by both governments and the Reserve Bank of Australia has meant that the economic damage in Australia has been less severe than in many other countries,” he said.
“But the surge in COVID‑19 cases in Victoria reminds us that we have got a long way to go.”
The weak growth will mean a tough time for the jobs market.
The bank is forecasting unemployment to peak around 9% later this year but to then average 8.8% through 2021.
Such a weak outlook for employment translates into wages growth of around 1.4% next year which will be either flat or negative in real terms (inflation is probably running about 1% a year at the moment on an underlying basis.
