(Bloomberg) — Australia’s JobKeeper wage subsidy expired Sunday, bringing to a close the nation’s largest Covid stimulus measure.
Treasury estimates up to 150,000 jobs could be lost with the end of the program and acknowledges some firms will collapse without government support. This could hit pause on a hiring boom that’s seen unemployment fall to 5.8% in February from a pandemic peak of 7.5% and early fears of 10% joblessness.
If all other labor market variables remained unchanged, Treasury’s upper estimate of job losses would send unemployment to 7%, according to calculations by Bloomberg News.
The government’s signature Covid-19 support program sought to keep workers attached to firms during lockdowns and other restrictions at an estimated cost of A$90 billion ($68 billion) — or around 5% of gross domestic product. The strategy, introduced at the beginning of the pandemic, was still subsidizing around 1.1 million workers at its conclusion, according to Treasury estimates.
While acknowledging the risks to these people, Treasury Secretary Steven Kennedy last week defended the decision to conclude JobKeeper. “The program has a number of features that create adverse incentives, which are likely to become more pronounced as the economy recovers,” he said.
Those sentiments were echoed by Reserve Bank of Australia Deputy Governor Guy Debelle, who said unemployment had fallen a lot faster than the central bank had anticipated. At the same time, he said “I don’t think we’re through the bumps and the unevenness yet. So it may not be a straight line from here.”
The RBA, in its February forecasts, predicted the jobless rate would be 6% by December this year and 5.5% at the end of next year. Under an optimistic scenario, it would fall to 4.75% by the end of 2022. Debelle said the bank hasn’t yet updated its outlook given the better-than-expected outcomes and will do so in its May update.
Upside Scenario
Since June 2020, Australia’s economy has generated more than 875,000 jobs and only shed positions in one month — September — that coincided with the southern state of Victoria’s second wave of Covid. The strength of the recovery suggests the labor market should absorb roles lost from the program expiring.
Job advertisements surged 7.2% in February and the RBA’s liaison with businesses indicated that some firms were having trouble finding suitable workers in select regions and industries.
Hiring should also be aided by New South Wales, the most populous state, scrapping a host of restrictions from Monday on the hospitality industry — one of the hardest hit by the pandemic — which should benefit businesses hamstrung by previous limits.
“The end of JobKeeper might mean a short spell in rehab for the economy, but its expiry will not be a medical emergency,” said Besa Deda, chief economist at St. George Bank. “The momentum in the jobs market will help the economy absorb its expiry. The unemployment rate should still end this year lower.”
Downside Risks
Yet the sheer scale of the program suggests there will be disruptions ahead. John Edwards, a former member of the RBA’s board and economic adviser to ex-Prime Minister Paul Keating, said JobKeeper’s removal represents “a fiscal contraction bigger than we’ve probably ever experienced.”
Australia’s border remains closed and isn’t likely to reopen until later in the year, at the earliest, leaving international education and tourism in flux. The government is assisting regions dependent on tourism and the airline industry via a A$1.2 billion package, yet further job losses are expected.
For Prime Minister Scott Morrison’s center-right government, the stimulus withdrawal poses a political risk. A rise in unemployment would erode the political capital accrued from the economy’s relative resilience at a time when popularity is already dented over the handling of scandals within parliament.
Last month’s jump in underemployment — or people employed who would like to work more hours — suggests there’s plenty of slack in the labor market.
“There is still more work to be done to lift hours back to pre-pandemic levels,” said Diana Mousina, senior economist at AMP Capital Investors Ltd. “There is still a larger than usual share of people who are working fewer hours because there is no work, there isn’t enough work or they have been stood down.”
She notes 167,500 people — or 1.3% of those employed — fit into this category and represent “the group that is most at risk of job loss after JobKeeper expires.”
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
