The latest OECD Economic Outlook has warned the Morrison Government that premature cuts to vital support in the economy will hamper Australia’s recovery from the worst downturn in almost a century.
The Prime Minister and Treasurer shouldn’t be patting each other on the back while Australians are still hurting, jobless queues are still getting longer, and there are ongoing challenges around underemployment.
Scott Morrison’s decisions to withdraw support too soon and exclude more Australians from income support will exacerbate the economic damage being inflicted on those who were hit hardest by the virus outbreak and left behind by initial policy and fiscal responses to the crisis.
Following the Morrison Government’s withdrawal of economic support, the OECD has joined the Reserve Bank, the IMF, Deloitte Access Economics and other prominent Australian economists who have called for more to be done, not less.
The Outlook highlights that:
- “The unwinding of the strong fiscal support will be a headwind to higher GDP growth in the second half of 2021.”
- “The aim for all countries should be to avoid a premature and abrupt removal of stimulus whilst economies are still fragile and growth remains hampered by containment measures.”
- “Gradual phasing out of job retention programmes and increased labour force participation will cause the unemployment rate to rise further.”
- “Fiscal and monetary policy support should not be withdrawn before the recovery is well entrenched.”
The OECD has confirmed its expectations that unemployment will remain above pre-pandemic levels until at least 2022.
In its latest decision on monetary policy, the Reserve Bank agreed: “the recovery is still expected to be uneven and drawn out and it remains dependent on significant policy support” which shouldn’t be withdrawn too soon.
Scott Morrison and Josh Frydenberg should bear these warnings in mind when they congratulate themselves for the expected but not surprising uptick in the September National Accounts following the easing of restrictions across much of the country and off an extremely low base.
WEDNESDAY, 2 DECEMBER 2020