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Analysis:

• There is considerable uncertainty about how the 1.1m people formally on the scheme will fare in the months ahead. This is also one of the most common questions asked by clients given how quickly the unemployment rate has fallen in Australia in recent months. Employment data will not start to reflect the end of JobKeeper until April data is published on 20 May, which is after the Budget and the RBA’s SoMP forecast update.
• In this Weekly we delve into this issue by trying to estimate how many people could potentially be displaced. We use four lenses: (1) looking at government estimates around possible job losses; (2) analysing which businesses were most prevalent in receiving JobKeeper and identifying vulnerable industry sectors; (3) reflecting on the experience of NZ which ended its wage subsidy scheme in Sep 2020 and saw the unemployment rate fall (rather than rise); and (4) utilising insights from NAB’s data.
• Government estimates of potential job losses point to the risk of 100-150k people being displaced. (Note each 14-20k jobs lost would be enough to lift the unemployment rate by 0.1 percentage point). If the full 150,000 become unemployed, they would add around 1 percentage point to the unemployment rate. However, our assessment suggests unemployment is unlikely to rise nearly that much because those unfortunate to lose their jobs should be able to find alternative employment elsewhere given strong labour demand, while others may leave the labour force.
• We conclude that the end of JobKeeper is unlikely to derail the economic recovery. Business conditions have rebounded, while payment inflows into NAB Merchants after removing payments associated with the wage subsidy scheme remain positive except for ‘accommodation & food services’ and ‘administration & support services’. This suggests most firms should be able to weather the impact of the end of JobKeeper. High job advertising suggests those displaced should also be able to find alternative employment. Despite the uncertainty due to the end of JobKeeper, the medium-term outlook for the labour market remains for further improvement.

Chart 1: 93k increase in those on reduced hours since pandemic

Chart 2: Victoria biggest JK beneficiary in January

Chart 3: JobKeeper tapered fast in Health and Retail

Chart 4: Unemployment rate has fallen quickly

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