300,000 jobs to be axed despite stimulus

4 Feb 2009, 7:14 am   -   Source: SBS staff with agencies
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The unemployment rate is expected to soar to seven per cent as the economy feels the heat from the global recession, the federal government warns.

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The unemployment rate is expected to soar to seven per cent as the economy feels the heat from the global recession, the federal government warns.

The Government says more people are now expected to lose their job as the economic downturn savages business, with the unemployment rate now forecast to rise to 5.5 per cent in 2008-09 and 7.0 per cent in 2009-10, taking the number out of work to almost 800,000. 

Govt pledges to save 90,000 jobs

The fears remain despite Mr Rudd pledging to save at least 90,000 jobs through the Government's stimulus package.

Some economists believe the Government has drastically underplayed the anticipated job losses.

The gloomy figures coincided with Harvey Norman announcing it was closing five of its OFIS stores - four of them in NSW - and rumours that Qantas was on the verge of another round of extensive job cuts, The Daily Telegraph reports.

In November, the government had forecast respective jobless rates of 5.0 and 5.75 per cent.

The unemployment rate was 4.5 per cent in December.

Unemployment 'to reach nine per cent'

JP Morgan chief economist Helen Kevens told The Daily Telegraph an unemployment figure of 9 per cent was more likely in 2010, with 7 per cent to be reached before the end of this year.

Under that scenario - last seen under the reign of former Labor PM Paul Keating  - the number of Australians out of work would climb to just short of a million.

"In our forecasts, we are going to see a significant slide in local labour market conditions over the next 12 months," Ms Kevens said.

"We are expecting the unemployment rate to double by the end of 2010 ... to just under 9 per cent."

In what can only be described as a mini-budget, yesterday the government launched a further $42 billion package to try and stave off a deep economic recession in Australia while confirming the budget will be in deficit for at least the next three years.

GDP expected to drop

The government also updated last November's Mid-Year Economic and Fiscal Outlook (MYEFO), slashing its economic and employment growth forecasts.

Because of the sharp deterioration in global growth since November, gross domestic product (GDP) is now expected to grow by just 1.0 per cent in the 2008/09 and by only 0.75 per cent the following year. 

This compares with respective forecasts of 2.0 per cent and 2.25 per cent made in November.

"No country will escape the impacts of the global recession, which is causing falls in growth, job losses and budget deficits right across the world," Treasurer Wayne Swan said in a statement.
   
"The weight of the global recession is now bearing down on the Australian economy. Economic growth is slowing and employment will weaken."

The budget is now expected to sink into a $22.5 billion deficit in the 2008/09 financial year, a massive deterioration from the $5.4 billion surplus projected in the MYEFO, and deepening into deficits of over $30 billion in the following two years.

This reflects the government's stimulus measures, but also the $115 billion in lost tax revenues during the next four years because of the collapse in world growth.

Investments in schools, roads, housing to create new jobs

The latest stimulus package - Nation Building and Jobs plan - will invest $28.8 billion in schools, housing and roads, and hand out $12.7 billion in payments to low- and middle-income earners, while aiming to support 90,000 jobs during the next two years.

It comes on top of the $10.4 billion stimulus package announced last October.

"There will be no quick fix to this global recession and many effects are still to be felt, but the Rudd government is taking the necessary and responsible action to help see Australia through this global crisis," Mr Swan said.
   
The mini-budget came as the Reserve Bank of Australia (RBA) cut interest rates to one per cent, taking the cash rate to 3.25 per cent, the lowest level in 45 years.


 

 

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