- Treasurer Josh Frydenberg has revealed the real unemployment rate is 13.3%.
- The figure is far higher than the headline rate, which doesn’t include those Australian workers who have stopped looking for employment during COVID-19.
- It could suggest the government is taking unemployment more seriously as Frydenberg prepares his July 23 budget update.
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While the official outlook isn’t good to begin with, the Treasurer has acknowledged that things are actually even worse.
Speaking on Monday, Josh Frydenberg revealed what the government actually believes the real unemployment rate to be, which includes those who have lost their jobs and stopped looking for a replacement one.
“[It is] around 13.3% right now,” he told media. “That is a large number of people reflecting the economic challenges that we see right now.”
Economists have repeatedly warned that a headline unemployment rate of 7.1% isn’t an accurate depiction of what’s going on in the workforce, putting the figure above 11% at least.
However, it’s a significant concession to be made by the Morrison government. The prime minister was as recently as last week justifying cuts to JobSeeker so as to motivate Australians to get back to work.
The admission that there are more out of work Australians than initially thought – at a time when there is also fewer jobs around – throws cold water on the suggestion that motivation has much to do with it.
Frydenberg, emphasising the significance of tax cuts and government payments, acknowledged there are difficult times to come.
“This will come at an important time for many people being challenged by the economic consequences of COVID,” he said.
“We have seen a big reduction in hours worked in the months since the COVID pandemic first hit in Australia.”
— Alex Joiner (@IFM_Economist) July 13, 2020
With Victoria’s new lockdown set to wipe out $1 billion each week, a sharp recovery is hardly assured.
This will remain front of mind for the Treasurer, the government’s most senior Victorian, as he prepares his budget update on 23 July.
“This recognition of … what is closer to the ‘true’ rate of unemployment will hopefully define the upcoming response from the government,” IFM Investors chief economist Alex Joiner said in a tweet.
With cornerstone policies like the JobKeeper wage subsidy up for revision, the update will mark the federal government’s biggest tell since March and indicate where the country’s recovery effort will be focused.
Understanding the reality on the ground is a strong start.
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