Australia's economy to shrink 10% in first half of 2020 from coronavirus hit; 6% of jobs lost

Reserve Bank of Australia Governor Philip Lowe said the unemployment rate is likely to be around 10 per cent by June.
Reserve Bank of Australia Governor Philip Lowe said the unemployment rate is likely to be around 10 per cent by June.PHOTO: AFP

SYDNEY (REUTERS) - Australia will suffer its biggest economic contraction since the 1930s in the first half of 2020 due to coronavirus-driven mobility restrictions, the central banker governor said on Tuesday (April 21).

Reserve Bank of Australia (RBA) Governor Philip Lowe said in a speech in Sydney the country's national output would fall by around 10 per cent in the first half of 2020, with most of this decline taking place in the June quarter.

Unemployment is likely to be around 10 per cent by June as total hours worked are likely to decline by around 20 per cent, he added. The jobless rate was at 5.2 per cent in March.

"These are all very large numbers and ones that were inconceivable just a few months ago," Lowe said in a speech. "They speak to the immense challenge faced by our society to contain the virus."

Earlier, figures from the Australian Bureau of Statistics (ABS) showed jobs recorded by the tax office payrolls system fell 6 per cent between March 14 and April 4, suggesting about 780,000 job losses.

The system covers about 99 per cent of substantial employers, those with 20 or more workers, and 71 per cent of smaller employers.

The largest drop was in the accommodation and food services industry where a quarter of jobs were lost, while arts and recreation shed almost 19 per cent of workers.

"The largest impact of net job losses, in percentage terms, was for people aged under 20, for whom jobs decreased by 9.9 per cent," said Bjorn Jarvis, head of labour statistics at the ABS.

The number of coronavirus infections in Australia is relatively small with the rate of growth slowing significantly in recent days.

 
 

However, the outbreak has spread rapidly from less than 100 cases in March to more than 6,600 now, prompting the government to shut non-essential businesses, ban overseas travel and large gatherings while enforcing social distancing rules.

Lowe said the economic recovery would be slow when these restrictions are eased.

"Whatever the timing of the recovery, when it does come, we should not be expecting that we will return quickly to business as usual," Lowe said in a speech broadcast live on the RBA's website.

"Rather, the twin health and economic emergencies that we are experiencing now will cast a shadow over our economy for some time to come."