Although the virus has delayed the budget until October .... last week the secretary to the Treasury dropped some big hints on what to expect. In evidence to the Senate committee inquiring into the response to the virus, Dr Steven Kennedy started with the outlook for the labour market. The latest figures from the Australian Bureau of Statistics are for the four weeks up to mid-April. In round figures, they show that 900,000 people lost their jobs during the period (although 300,000 gained jobs), 1 million people worked fewer hours and three-quarters of a million kept their jobs but worked no hours (most of them protected by the JobKeeper wage subsidy scheme). So that’s a total of 2.7 million workers – about one worker in five - adversely affected by the snap recession. Total employment fell by 4.6 per cent, but total hours fell by twice that – 9.2 per cent, telling us much of the pain was borne by part-time workers. The rate of under- employment (mainly part-timers working fewer hours than they want to) leapt by almost 5 percentage points to 13.7 per cent. The “good” news is, Kennedy thinks that’s most of the collapse in employment we’re likely to see. We may get a bit more in the figures for May, and maybe even a fraction more in June. But that should be it. The trick, however, is that though the underlying position won’t be getting much worse, we’ll see the rate of unemployment shooting up. It had risen by “only” 1 percentage point to 6.2 per cent by mid-April, but Kennedy expects it to be closer to 10 per cent by mid-June. (And it would have gone a lot higher but for the JobKeeper scheme.) Such a strange outcome – it’s not actually getting much worse, but the unemployment rate is rocketing – is explained by the strange nature of this “coronacession”: a recession caused by the government, acting under doctors’ orders. That’s looking at our domestic economy. Looking at the prospects for the global economy, it’s possibly worse than he first thought. But even here Kennedy finds some source of hope. It so happens that our major trading partners – China, South Korea and Japan – are among the countries that have done better at beating the virus and getting back to work. READ THE ABOVE ARTICLE AND ANSWER THE FOLLOWING THREE QUESTIONS: Question 1. Consider the statement: The trick, however, is that though the underlying position won’t be getting much worse, we’ll see the rate of unemployment shooting up. It had risen by “only” 1 percentage point to 6.2 per cent by mid-April, but Kennedy expects it to be closer to 10 per cent by mid-June. (And it would have gone a lot higher but for the JobKeeper scheme.) Answer the following, using information from the article: 1a Explain why Kennedy sees the rate of unemployment ‘shooting up’ to 10 per cent. In your answer discuss the significance of the participation rate in affecting the mid-April unemployment rate. 1b If, as the Government currently states, the JobKeeper allowance is discontinued in early September, use the Aggregate Expenditure model to discuss the range of impacts this may have on aggregate expenditure in this year’s December Quarter (this is the period from September to December 2020). Be sure to outline the economic reasoning behind your answer and to clearly reflect this in your AE model depiction.
|
Although the virus has delayed the budget until October .... last week the secretary to the Treasury dropped some big hints on what to expect. In evidence to the Senate committee inquiring into the response to the virus, Dr Steven Kennedy started with the outlook for the labour market. The latest figures from the Australian Bureau of Statistics are for the four weeks up to mid-April. In round figures, they show that 900,000 people lost their jobs during the period (although 300,000 gained jobs), 1 million people worked fewer hours and three-quarters of a million kept their jobs but worked no hours (most of them protected by the JobKeeper wage subsidy scheme). So that’s a total of 2.7 million workers – about one worker in five - adversely affected by the |
|
snap recession. Total employment fell by 4.6 per cent, but total hours fell by twice that – 9.2 per cent, telling us much of the pain was borne by part-time workers. The rate of under- employment (mainly part-timers working fewer hours than they want to) leapt by almost 5 percentage points to 13.7 per cent. The “good” news is, Kennedy thinks that’s most of the collapse in employment we’re likely to see. We may get a bit more in the figures for May, and maybe even a fraction more in June. But that should be it. The trick, however, is that though the underlying position won’t be getting much worse, we’ll see the rate of Such a strange outcome – it’s not actually getting much worse, but the unemployment rate is rocketing – is explained by the strange nature of this “coronacession”: a recession caused by the government, acting under doctors’ orders. |
That’s looking at our domestic economy. Looking at the prospects for the global economy, it’s possibly worse than he first thought. But even here Kennedy finds some source of hope. It so happens that our major trading partners – China, South Korea and Japan – are among the countries that have done better at beating the virus and getting back to work.
READ THE ABOVE ARTICLE AND ANSWER THE FOLLOWING THREE QUESTIONS: Question 1.
Consider the statement:
|
The trick, however, is that though the underlying position won’t be getting much worse, |
|
we’ll see the rate of unemployment shooting up. It had risen by “only” 1 percentage point to 6.2 per cent by mid-April, but Kennedy expects it to be closer to 10 per cent by mid-June. (And it would have gone a lot higher but for the JobKeeper scheme.) |
Answer the following, using information from the article:
1a Explain why Kennedy sees the rate of unemployment ‘shooting up’ to 10 per cent. In your answer discuss the significance of the participation rate in affecting the mid-April unemployment rate.
1b If, as the Government currently states, the JobKeeper allowance is discontinued in early September, use the Aggregate Expenditure model to discuss the range of impacts this may have on aggregate expenditure in this year’s December Quarter (this is the period from September to December 2020). Be sure to outline the economic reasoning behind your answer and to clearly reflect this in your AE model depiction.
Step by step
Solved in 2 steps with 1 images
