The unemployment rate will jump to 8.5% by the end of 2010, with more than one million Australians jobless by the end of next year, according to new Access Economics data.
But the Australian economy is relatively sound compared to other developed nations, and even now signs of recovery are beginning to emerge, the forecaster claims.
The new Access Economics Business Outlook report for March 2009 reveals that the forecaster has lifted its jobless rate prediction from 7.5% in mid-2010.
“Families and businesses are starting to save rather than spend, so the pull back in the pace of demand growth is being accompanied by a sharp rise in unemployment,” Access chief economist Chris Richardson says.
“Sadly, we have now revised that up to around 8.5% by late 2010 (election time), with close to a million unemployed Australians – 2010 is looking increasingly like a continuation of the bad news of 2009.”
Access says that the trade deficit is also set to rise as demand for exports falls and the price of the stuff we sell (such as coking coal) is taking a rather bigger hit than the stuff we buy (such as plasma TVs). A higher trade deficit will pull down the Australian dollar.
Richardson has also made the bold claim that the ballooning budget deficit is likely to mean tax cuts are off the agenda for a decade.
“The tax cuts of recent years mean fiscal drag now only adds $1 billion to $2 billion a year to the tax take. So, after promised tax cuts in 2009 and 2010, you may well have to wait almost a decade until the next tax cut – unless we have the courage to finally tackle middle class welfare.”
Treasurer Wayne Swan said that the Access forecasts highlight the troubles the Government is experiencing with lower revenues.
“The Access report certainly demonstrates the brutal impact on Government revenues and the consequence of that is a higher temporary deficit,” he said.
But Richardson says despite the bad news, there are “key reasons to be optimistic”, and that efforts by the Government to introduce economic stimulus are welcomed.
Richardson’s bright spots include “the rude good health of our banks, the sharp fall in the dollar in the second half of 2008, our very rapid population growth, the lack of vacancies in housing markets, the large pipeline of engineering and commercial construction yet to be done, and better growth in our backyard…than anywhere else in the world.”
The report claims that stimulus packages along with interest rate cuts “presents a powerful set of reasons why Australia should continue to outperform most of the other rich nations throughout the world during this global recession”.
The forecaster claims public sector funding will help spur growth in the education and health sectors, while growing enrolments in education programs may provoke funding.
It also says the news of the national broadband network should help boost competition in the communications sector.
But Access also says that while construction will continue to slow during 2009, and that the utilities industry will continue to decline, changes to exchange rates and commodity prices may bring “relatively better medium term news for most manufactures, farmers, tourism and housing construction”.
The report claims that New South Wales is suffering the most from the recession, and that 2009 “should prove close to being as bad as it gets, with the next phase – through 2010 and beyond – to be one of consolidation and recovery in relative terms”.
It also says that Victoria is surviving under a population boom, but that Queensland’s performance will drag down with Japan’s. Japan – the country’s second-largest trading partner – has seen its economy shrink at the fastest rate since 1974 during the oil crisis.
The report claims that the ACT is the safest state to survive the recession unscathed, and that “public sector cutbacks will not be as notable or as volatile as those in the private sectors of the other states, but this will be a tough couple of years anyway thanks to the severity of the commercial construction slowdown.”
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Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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