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Based on Reserve Bank of Australia assessment.

SUMMARY:
Pre-COVID “normal” unemployment rate = 5%
Current unemployment rate = 6.2%
Good case scenario unemployment peak = 10-12%
Good case scenario situation back to “normal” = By year June 2022 (two years)
Worst case scenario unemployment peak = Over 10% till June 2021.
Worst case scenario situation back to “normal” = We don’t know. June 2022 unemployment rate 7-9% still.

DETAILS:
Yesterday i.e., 14th May, damage report came in; So far, almost 600,000 Australians have lost their jobs due to COVID, bumping the unemployment rate up one full percentage point, from 5.2 per cent to 6.2 per cent.
Australia is a medium-sized trading nation, and as such we depend a lot on the rest of the world – especially the United States & China. The US is doing everything wrong in managing this virus. If there is going to be a big second wave of infections anywhere, it will be in America. That would slow down growth in the world’s biggest economy and inevitably it would have an effect on Australia. And affairs with China are looking uncertain with recent import embargos on Australian produce.

GOOD CASE SCENARIO:
Unemployment peaking over 10 per cent. But in this upside scenario the bad times don’t last. The labour market heals quickly and is back to its current levels within about two years. The assumption is that we beat the virus, and people get their confidence back.
“Because of the better health outcomes and policy stimulus in place, the rebound in consumer demand and reduced uncertainty about the outlook would allow businesses to rehire workers and resume investment plans quickly,” the RBA said.

WORST CASE SCENARIO:
In this scenario, we spend a full year with unemployment over 10 per cent. That drags out the recovery. By mid 2022, unemployment is still higher than it was a few months ago – well over 7 per cent. That means looking for a job would be very hard for a very long time. One of the problems in the downside scenario is even people who do have jobs are forced to take one that doesn’t suit their skills, such as driving for Uber. That’s an example of what the RBA calls a “poor match”.

“The longer the economy remains weak, the more employment relationships are severed and the more households and firms will suffer severe financial stress. This would slow the recovery further and increase the chance that workers need to take jobs that are poor matches for their skills,” the RBA said.

The downside scenario will come true, the RBA reckons, if travel restrictions are in place until next year, if we need to go back to restrictions due to a second wave, or if household and business confidence remains low. Any or all of which seem quite plausible.

SO...
In the 1980s recession, it took two years for unemployment to peak, and another six years to recover. In the 1990s recession, it took three years to peak and eight years to recover. The RBA likes to make its forecasts symmetrical, where the downside and the upside are balanced. But the pandemic is like the butterfly effect – consequences will spiral out in ways that are very hard to predict. That means that while the best case scenario is just a return to boring old normal, the worst downside scenario is not just the mirror image of that – it’s much worse.

Goodluck to us all!

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Based on Reserve Bank of Australia assessment.

The US is doing everything wrong in managing this virus. If there is going to be a big second wave of infections anywhere, it will be in America. That would slow down growth in the world’s biggest economy and inevitably it would have an effect on Australia.

The US is hardly doing "everything wrong", in fact the US is working diligently to get the economy up and going, people don't want to sit around being unproductive, ordered or dictated what actions they may take. Citizens of the US fear mass starvation and lack of income more than they fear a virus that has inconsistent stats provided by a government that the citizens don't trust and government/corporate motives that are more frightening than any virus would ever be! In the US the problem occurs in the rift between states that want to get the economy back up and running (like a republic nation would) versus states that want to continue to keep the lockdown going indefinitely (like a dictator nation would). What the US will have that Australia will not, is heard immunity and so a second wave is less likely to be as bad

GOOD CASE SCENARIO:
Unemployment peaking over 10 per cent. But in this upside scenario the bad times don’t last. The labour market heals quickly and is back to its current levels within about two years. The assumption is that we beat the virus, and people get their confidence back.
“Because of the better health outcomes and policy stimulus in place, the rebound in consumer demand and reduced uncertainty about the outlook would allow businesses to rehire workers and resume investment plans quickly,” the RBA said.

Australia is in excellent shape to get back to business, but it will have to rely on their own domestic economy along with some exports. This will not make the economy as strong as pre-lockdown, but it will hopefully hold unemployment at a steadier rate.

The downside scenario will come true, the RBA reckons, if travel restrictions are in place until next year, if we need to go back to restrictions due to a second wave, or if household and business confidence remains low. Any or all of which seem quite plausible.

Australia along with New Zealand, have made themselves too sterile to rapidly allow the outside world back in. This will hold any international travel at bay until the virus dies down significantly around the globe. Again, businesses can do all their best to keep the economy going, but it will have to do it within a bubble for quite some time unless the nation decides to take a risk and allow for the virus to do what viruses do and that's run its own course!

Goodluck to us all!

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Good luck to everyone around the world indeed!
 
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