Treasurer Josh Frydenberg says the surprising strength in Australia’s labour market has justified ending the JobKeeper wage subsidy, despite calls for it to be extended.
The end of the subsidy in March raised concerns about the impact on future unemployment, particularly as Treasury had estimated as many as 150,000 jobs could be lost as a result.
Yet employment has proved extremely resilient in the run-up to this stimulus measure ending, with the jobless rate falling to 5.6 per cent.
This compares with a prediction in last December’s mid-year budget review of a 7.5 per cent unemployment rate in the March quarter.
“The labour market has very much surprised on the upside,” Mr Frydenberg told reporters in Perth on Thursday.
“You remember everyone calling for us to extend JobKeeper. Well, the early signs – and it’s still too early to reach a definitive position – is that we haven’t seen those long lines outside Centrelink.”
He said people are getting back to work and businesses are reopening.
There was also further positive news on the economic outlook with signs the strong recovery from last year’s recession has spilled over into the first three months of 2021.
Business conditions and confidence are running well above their long-run averages, with profitability, trading and employment all well into expansionary territory, a new report showed.
The National Australia Bank’s quarterly business survey indicated this improvement is broad-based in most industries.
“The survey suggests that the economic recovery built further momentum in Q1,” NAB group chief economst Alan Oster said.
He expects the economy will have fully recovered its COVID-19 pandemic loses in the March quarter.
Forward orders and expected forward orders in three months time recorded another strong increase.
Similarly, expectations for business conditions, employment and capital expenditure on a three and 12-month horizon also rose to relatively high levels, suggesting further gains in activity and employment over the year.
“While a return to a pre-COVID level of activity would be an important milestone, it would not be a case of ‘mission accomplished’ as we would normally expect the economy to grow over time,” Mr Oster said.
“That is why a very welcome aspect of the survey is the strength across all the leading indicators, which suggests that the recovery should continue at a relatively strong pace.”
After plunging by a massive seven per cent in the June quarter of last year during the depths of Australia’s first recession in 30 years, the economy expanded by 3.4 per cent in the September quarter and 3.1 per cent in the December quarter.
This was the first time there has been two consecutive quarters of economic growth above three per cent on record.
The March quarter economic growth result is due on June 2.