• Australia will need to become used to high unemployment, with the jobless rate set to struggle to return to below 6% for years to come.
• New Deloitte analysis projects that it will take two years just to move the jobless rate 1.3% lower.
• More broadly, a lack of growth is likely to see a “collapse” in wage growth, according to Deloitte partner Chris Richardson.
• Visit Business Insider Australia’s homepage for more stories.

Australia’s economic pain will come quickly and fade slow, according to the latest look at the numbers.

Budget analysis published by Deloitte on Monday contends that while unemployment is set to soar in the second half of this year to around 10%, the federal government will struggle for years to come in getting unemployment back underneath 6% – its new big economic goal.

“[Deloitte] forecasts employment to fall by 0.5% in the year to June 2022 as businesses feel the pain from the winding back of earlier government support. This is expected to be followed by modest growth of 0.8% in the year to June 2023,” Deloitte Access Economics partner Chris Richardson wrote.

“The bottom line is that job levels remain well below Treasury’s pre-COVID trajectory for them.”

The current figures suggest it will be a four-year battle to put Australians back to work at pre-pandemic levels. Evidently, the road to recovery will be more protracted than the one that led us into recession.

“Both our prosperity and our fairness are taking heavy blows from the coronavirus crisis there’s never before been a hit to the Australian economy that’s this big and this fast,” Richarson wrote.

“Relatively more jobs have been lost where unemployment was already the highest. Suburb by suburb in the cities, town by town in the bush, the pain to our livelihoods isn’t evenly spread.”

By demographic, it has been women, casuals, part-time workers and young Australians who have been hit hardest, as early lockdowns shuttered some sectors before others. Equally, lifting lockdowns are expected to produce a bigger bounce among the workforce of pubs, clubs, hotels, gyms, cinemas, and entertainment centres. Meanwhile, Victoria will start behind the rest of the pack due to its ongoing lockdown.

“Whereas the war for our health has been a sprint, the war for our jobs will be a marathon. Both history and economics tell us that unemployment goes up fast, but it comes down slow,” Richardson wrote, noting the RBA has already done all the heavy lifting it can.

“In every other recession and recovery you’ve seen, the Reserve Bank could always do more if it needed to. But not this time.”

Instead, state and federal government will need to spend, spend, spend, as well as look at genuine reform to kickstart growth. Whatever the federal government decides to do will likely to be announced in the October budget, as existing support measures fall away.

They will need to with the lingering effects of a weakened workforce to be felt for years. While sluggish wage growth had been the bugbear of Australian economists for years, even that will look enviable to a “collapse” in wages post-COVID, restricting spending and further inhibiting growth.

Accordingly, Australians should at least pay less tax as fewer workers creep into new income brackets. Hardly a silver lining – but Australians may have to take what they can get.

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