Frydenberg Sees Jobless Rate Rising, Signals Stimulus Taper

(Bloomberg) -- Australian Treasurer Josh Frydenberg said the jobless rate is likely to climb to about 8% in the third quarter and signaled he doesn’t intend to take a “cold turkey” approach to fiscal support when it’s due to end in September.

“The unemployment number will get higher in the coming months,” Frydenberg said at the Bloomberg Invest Global virtual event. “We recognize that some sectors will recover faster than others, particularly as the restrictions are starting to ease we are seeing the hospitality, the retail businesses be more busy. But at the same time as long as those international borders are closed, tourism is going to hurt.”

Australia’s jobless rate surged to 7.1% in May as the economy posted its biggest back-to-back monthly job losses on record. Frydenberg is due to deliver an economic and fiscal statement July 23 and is under pressure to extend programs like JobKeeper, which provide a wage subsidy allowing employers to keep on workers.

Central bank board member Ian Harper last week urged the government to implement a “tapering arrangement” for its stimulus programs, warning a sharp cutoff would damage the recovery and potentially drive unemployment even higher.

“The jobkeeper program is currently under review,” Frydenberg said. Asked directly if the government was considering tapering parts of the program or going “cold turkey,” Frydenberg said: “They are all the questions we are considering as part of the review.”

He said that the government was already providing sector-specific support, citing infrastructure spending and grants to buoy the construction industry.

While the economy lost more than 800,000 jobs in April and May, more timely indicators are painting a better picture. Outside of a small outbreak in the southern state of Victoria, authorities have flattened the Covid-19 infection curve and are reopening the economy earlier than expected. Consumer confidence this month rebounded back to levels before the virus.

Central bank Governor Philip Lowe said Monday that the fall in hours worked in Australia was likely to be 10%, rather than the 20% he had earlier feared, and painted a better outlook for the economy, particularly compared with international counterparts.

“The economy is moving in the right direction,” Frydenberg said, echoing those sentiments.

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