Australia Treasury Sees Unemployment Soaring to 10% This Quarter

(Bloomberg) --

Australia’s jobless rate will almost double this quarter, the nation’s Treasury estimated, as the shutdown of large swathes of the services industry upends the labor market.

Unemployment will soar to 10% in the three months through June, from 5.1% in February, Treasurer Josh Frydenberg said Tuesday, citing department forecasts. Without the government’s subsidy to keep workers attached to their employers, it would reach about 15%, he said.

“The economic shock facing the global economy from the coronavirus is far more significant than what was seen during the global financial crisis,” he said in a statement. “Businesses across a range of industries have had to close their doors and others have seen a significant drop in activity as countries, including Australia, exercise social distancing measures to contain the spread of the virus.”

Australia’s fiscal and monetary authorities have injected massive stimulus into the economy as it spirals toward its first recession in almost 30 years. Their aim is to keep the downturn as shallow as possible and to keep workers connected to their jobs so activity rebounds once the health crisis passes.

Household debt is among the highest in the developed world, creating a financial stability vulnerability from a spike in joblessness. The government’s fiscal actions aim to prevent Australians from permanently losing their jobs, which opens up the prospects of greater mortgage defaults.

Treasury’s unemployment estimate comes ahead of March labor market data Thursday, with economists forecasting the economy shed 30,000 jobs and the jobless rate rose to 5.4%. Job advertisements slumped 10.3% last month, private data showed.

S&P Global Ratings last week downgraded Australia’s AAA credit-rating outlook to negative, reflecting increased government spending and the associated jump in the nation’s debt burden.

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