There will be 700,000 fewer people in Australia by the end of this year, and unemployment is likely to fall to just above 4%, according to the latest Deloitte Access Economics Business Outlook report.
According to the report, 100,000 people are expected to return to the labour force this year and 200,000 more people will find jobs.
Although it sounds promising, Chris Richardson, partner, Deloitte Access Economics, said the predictions were based on a number of assumptions including the roll-out of booster shots to mitigate ongoing mutations so that lockdowns were not lengthy or large scale.
Mr Richardson also noted the report’s expectations rely on the presumption that COVID treatments for those who get the virus continue to improve, as well as the return of migrant, student, and tourist numbers in 2022.
“China’s economy has softened in ways that particularly challenge us,” he said.
“And the markets wrested control of the cost of money away from the RBA, notably raising the cost of two- and three-year fixed-rate loans at a time when borrowings have leapt.”
Mr Richardson said 2021 recorded the fastest growth in the Australian economy since 2007, making it the second-fastest growth seen in the past two decades.
“We see 2022 as a similar story, with Australia’s growth remaining above average as pandemic damage to the economy continues to be repaired. Yet risks remain high: COVID isn’t done with us,” he said.
“Supply snarls have given businesses more pricing power than they’ve had in decades. Add higher energy prices and a weaker Australian dollar and consumer prices have spiked. But so far prices have grown faster than wages. Unless wage gains accelerate a lot, inflation will ease.”
On a more positive note, the report predicts that Australia’s GDP will increase about 3.6%, and household spending will rise about 6.4%.
Business investment is also expected to increase about 5.2% while exports will see a 4.4% rise.
“Few things have generated much joy during the COVID era, but Australia’s job performance is one of them,” Mr Richardson said. “Each time the nation has managed to get its nose ahead of COVID, the job market has exploded with the exuberance of a Labrador puppy taken for a walk. Even better, soaring job vacancies say there’s petrol left in the tank. COVID permitting, we see the unemployment rate flirting with 4% by end-2022.”
Although the report suggests that 2022 may well avoid large and lengthy lockdowns, COVID mutations and subsequent outbreaks will affect almost all businesses, especially tourism, hospitality, administration services, and arts and recreation.
“Yet the bad news for those sectors will see matching good news for sectors that fight the pandemic and protect the economy – the likes of the public sector, finance and health will stay stronger for longer during 2022 because they’ll need to, while another year of record harvests means farmers are doing even better,” Mr Richardson said.