The Queensland Premier’s decision to reopen the border to non-Victorian interstate travellers and to bring forward the relaxation of a range of restrictions will no doubt provide a bit of a boost to the economy (e.g. the Courier-Mail is reporting $520m a month, 50k jobs to flow from eased restrictions). But, at best, it’s still early days in the recovery from the virus recession, and there’s always the possibility the recovery could stall and the economy settles into an extended slump, particularly with all the financial damage being done to businesses.
There is legitimate concern about what happens when the JobKeeper lifeline is withdrawn from many businesses at the end of September. Fairfax economics correspondent Shane Wright wrote yesterday, in his article RBA warns ending stimulus will be ‘a problem’ as jobs recovery slows:
A sudden halt to government stimulus to support the economy through the coronavirus recession would be a problem, the Reserve Bank has conceded, with signs the jobs market is failing to bounce back from pandemic-related shutdowns.
It’s obvious the federal government will need to extend the stimulus in some way, such as via a more targeted JobKeeper and bumping up the standard rate of JobSeeker (i.e. excluding the coronavirus supplement). This is because the drop in government support to the economy at the end of September will be huge and may lead to any recovery stalling in December quarter, when we will likely see many of the so-called zombie firms shutting up for good.
On the ABC 730 program the other day, Grattan’s Danielle Wood said that federal support equal to 15% of GDP in quarterly terms will be “turned off at the end of September” (Gov’t will not reveal plan for future of JobKeeper for weeks). That’s an enormous adverse shock for the economy to adjust to over the rest of 2020.
Regarding “signs the jobs market is failing to bounce back”, Wright is referring to the latest payroll jobs data released by the ABS yesterday (see chart below).
With the possibility international travel won’t be back to normal until 2022, our economy, to which international tourism and international education made substantial contributions, certainly won’t be able to regain any semblance of normality for a while yet.