Ahead of the national cabinet meeting on Friday (8 May), which is predicted to move towards easing the restrictions, Mr Frydenberg has explicitly stated “we must get people back into jobs and back into work” to drive economic growth and employment.
Speaking at the National Press Club on Tuesday (5 May), Mr Frydenberg acknowledged that had Australia been forced into European-style restrictions, then the adverse impact on GDP could double to 24 per cent, or $120 billion, in the June quarter.
Instead the economic hit is forecast at some $50 billion as many of the worst-hit sectors, such as retail and hospitality, are also some of the biggest employers.
Presenting the findings of the Treasury’s research, Mr Frydenberg underlined that rebooting the economy is the crucial next step as the country continues to battle with COVID-19.
“For every extra week the current restrictions remain in place, [the] Treasury estimates that we will see close to a $4 billion reduction in economic activity from a combination of reduced workforce participation, productivity and consumption,” he said.
“This is equivalent to around what 4 million Australians on the median wage would earn in a week. History shows that the longer people are unemployed, the harder it is to get a job.”
He, however, opined that unemployment should bounce back fast.
“In the early 1990s, unemployment increased by 5 per cent over three years, but took seven years to get back to its pre-crisis level. As has been remarked, unemployment went up in the elevator, and went down by the stairs,” the Treasurer said.
“In the current coronavirus, it is expected the unemployment rate will go up by around 5 per cent in three months, let alone three years.
“It underlines the importance of getting people back to work as soon as possible to avoid the long-term economic and social impacts from a high unemployment rate.”
In setting out some key principles for recovery, Mr Frydenberg said “unleashing the power of dynamic, innovative and open markets would be central to the recovery, with the private sector leading job creation, not government”.
“There is a risk that protectionist sentiment re-emerges on the other side of the crisis, and for that we must be vigilant,” Mr Frydenberg said.
“While we must always safeguard our national interest, we must also recognise the great benefits that have accrued to Australia as a trading nation.”
National cabinet has signalled it will assess opportunities for easing restrictions on Friday, after shutting down restaurants, shops, pubs and cafés in late March.
Using credit card data provided by the banks, Mr Frydenberg said spending on arts and recreational services was down by 60 per cent and accommodation and food services was down around 70 per cent in late April compared with the previous year.
“Despite the toilet paper boom and the record increase in retail trade in March due to panic buying, overall consumption, according to NAB data, has fallen by 19.5 per cent since the start of the year, with declines across all jurisdictions,” he added.
Victoria has had the steepest fall of 23 per cent, followed by the ACT (20.7 per cent), WA (20.5 per cent), NSW (20.4 per cent), Queensland (18 per cent), South Australia (16.8 per cent), the Northern Territory (15 per cent) and Tasmania (14.9 per cent).
“While the shadow of the economic shock created by this crisis will be both profound and long-lasting, we can remain optimistic about our future,” Mr Frydenberg concluded.