On his forecasts the unemployment rate will peak at 6.7 per cent in 2021-2022 before falling back in 2022-2023 and continuing to recover for years. GDP will rise, spending will increase and the housing construction sector will continue to surge.
The sharp turn around in fortunes is largely due to billions of dollars of federal government interventions, like wage subsidy JobKeeper, stimulus packages including the $25,000 HomeBuilder grant, and a tight control on virus outbreaks in most states and territories. Many of the fiscal support programs have been extended during the crisis to keep companies and workers afloat.
This time it’s looking less likely. Over the past week, Treasurer Josh Frydenberg has staunchly repeated the plan for JobKeeper to come to an end in March. More optimistic economic forecasts are helping justify the tapering down in government spending. Frydenberg has released data showing the government’s actions will lead to an economy that is 5 per cent bigger in 2020-2021 than it would’ve otherwise been and 4.5 per cent larger in 2021-2022.
“The unprecedented economic support provided by the Morrison Government during the crisis means that even as JobKeeper and other temporary emergency support measures taper off a fiscal cliff is avoided,” he said. But is it a bit premature to say: “That’s all, folks”?
Richardson believes this year has begun beautifully with low COVID-19 cases in Australia, an upcoming vaccine roll out, rebounding confidence and improvements in the job market. In an upbeat view of the future, productivity could be improved as the vaccination technology may be used to solve other health issues and Australia is well-positioned to be a drawcard for skilled migrants.
But he is alert to the risks of a fraught trade relationship with China, long-term scarring on young Australians who lost work or failed to get onto the career ladder during the crisis, global economic problems and the uncertainty of the vaccine roll out. If the vaccinations do not go to plan, this will severely affect Deloitte’s outlook and the future of the nation.
Business lobby groups are also acutely concerned about the upcoming drop off in support. They are planning to ask for more assistance in pre-budget submissions due to Treasury by the end of this month. The tourism industry and hospitality sector, in particular, are finding it tough to contemplate a future without open borders and lowered government assistance. Small business lobby groups are going to ask for interest-free or low interest HECS-style loans for struggling companies.
Plenty of other groups will request extra support to cushion them for when they hit the ground. Most experts think this will require more industry specific financial measures than economy-wide schemes like JobKeeper.
The story of the Warner Bros’ Bugs Bunny cartoon is also more complicated than it first appears. Before the episode went to the cutting room floor, both Bugs and Willoughby had an uncertain future when the curtain closed.
In the original version they face more than one cliff. And at the end of the episode it is not clear whether they survive at all. Karl Cohen’s book Forbidden Animation, discussing censorship of cartoons in the US, says producer Leon Schlesinger intervened in this ending. He ordered it to be cut and replaced with footage showing the cartoon duo having a soft landing on their feet. The issue caused such a rift that the show’s animator Tex Avery walked out of the studio and was given a four-week suspension without pay.
Australia’s most troubled businesses are facing their own Heckling Hare-style cliff-hanger. It’s now up to the federal government to go to the cutting room floor to determine their future.
Ross Gittins is on leave.
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Jennifer Duke is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra.