Australia’s economic comeback from COVID has been stronger and faster than even the most optimistic forecasts last year. Whereas it took 10 years for the unemployment rate to recover after the 1990s recession, we are now on track for the unemployment rate to recover after the COVID-19 recession in around just two years.
Even as recently as last December, Treasury expected unemployment would be at 7.5 per cent in the March quarter of this year.
Instead, it sits at 5.6 per cent in March with 200,000 more Australians in work than initially forecast.
We are set to avoid what many feared could be another generation lost to long-term unemployment.
Consumer confidence, business investment and the housing market are also strengthening, contributing to the significant momentum building in the Australian economy.
Indeed, the size of the Australian economy was not expected to reach its pre-pandemic level until the end of this year, but it now looks likely to do so nine months earlier.
While this is very positive and encouraging data, we must also be mindful that we are still in the midst of a global pandemic.
The devastating images from India attest to that.
Everyday there are more than 800,000 new COVID cases around the world, as the death toll surpasses three million.
Here at home, our international borders remain closed and Western Australia has only just got out of lockdown.
It’s a timely reminder that while we have done better than nearly any other country in the world, on both the health and the economic front, there is no room for complacency.
This is why the upcoming Budget will continue to provide the necessary support to meet the ongoing health and economic challenges we face.
It is not a time for austerity or prematurely removing economic support.
Our focus will be on driving down unemployment to where it was prior to the pandemic and then even lower.
Analysis by the Treasury and the Reserve Bank indicate that in order to see an acceleration in inflation and wages, the unemployment rate will need to have a four in front of it.
Australia has not seen unemployment under 5 per cent for a sustained period since 2006-2008.
Before then, you need to go back to the early 1970s.
This will be hard and it will take time. But if we reduce the unemployment rate, we not only increase the quality of life for more Australians, but we also improve the Budget bottom line.
By example, having 200,000 more people in work Treasury estimate will lower the government’s welfare bill by around $3 billion and increase the tax take by about $2 billion.
By repairing the economy, we repair the Budget.
This is how we delivered the first balanced Budget in 11 years prior to COVID, by getting welfare dependency to a 30-year low and more people into work.
The Morrison government’s fiscal strategy is a pathway to more jobs.
Spending must be targeted and focused on those areas that deliver higher productivity.
Skills, infrastructure, tax relief, energy and digital transformation are just a few of the areas the government has been delivering on.
In the face of a once in a century pandemic, the Morrison government’s unprecedented economic support has helped save more than 700,000 jobs and created many more.
Programs like JobKeeper, Job-Seeker, HomeBuilder and the cash flow boost have all played their role in cushioning the blow.
As we move to the recovery phase we have been successfully transitioning off these emergency support measures without the sky falling in.
We do, however, recognise the recovery still has some way to go and there are regions and communities that continue to do it tough.
That is why our economic support will continue in this year’s Budget in a targeted and considered way as we pursue a stronger economy with even more Australians in jobs.
Josh Frydenberg is the Federal Treasurer