The end of JobKeeper could see Cairns unemployment rate lift as high as 8.5%

Due to a written response by Treasury to the Senate COVID committee (available here) I’ve been able to update and rethink my estimates of JobKeeper in Cairns (SA4) and what might happen come March when the scheme is due to end.

Treasury told the committee that JobKeeper recipients for the Sept payments (i.e. those receiving the original JobKeeper 1.0 payments) in Australia were 3.58m (in QLD the figure was 624,000). By the time of the October payments (i.e. the first quarter of the new JobKeeper 2.0 scheme which started when JobKeeper 1.0 ended at the end of Sept) that number had fallen to 1.55m (QLD 237,000).

That represents a fall of 56.5% (QLD 62.1%) from the end of JobKeeper 1.0 to the start of JobKeeper 2.0! Unemployment in Australia lifted by 24,000 between Sept and Oct according to ABS data (i.e. just over 1% of the number who dropped off JobKeeper) and by 4,600 in QLD (also 1%). It’s very clear from this data that a huge number of workers were still receiving JobKeeper 1.0 well beyond the point at which their employers were struggling sufficiently that they would need to lay people off when support was removed. The data suggests that 99% of those who ceased to receive JobKeeper payments at the end of September did not lose their job.

When we consider things in Cairns we have to acknowledge that the situation is rather different. Cairns is heavily reliant on international tourism (which has essentially ceased to exist since April last year) and the impact of the pandemic has been felt more acutely by many firms in Cairns than elsewhere. Given our modelled estimate of about 31,700 on JobKeeper 1.0 in the Cairns SA4 region, a similar outcome to that seen in QLD would mean only about 12,000 on JobKeeper 2.0 in the Dec quarter. Acknowledging the higher rate of JobKeeper in Cairns because of its reliance on international tourism I would estimate that number is probably closer to 17,000. Our Conus/CBC Staff Selection Trend series showed virtually no change in the number unemployed in Cairns between Sept and Oct despite this large drop in those receiving JobKeeper, as was the case across the nation.

By the time the March quarter JobKeeper 2.0 came into effect (for which we currently have no actual data) our model suggests that the number of JobKeeper recipients in Cairns may have fallen further to about 10,000. Clearly, given the fact that these residual workers have been on JobKeeper all the way since March last year, this represents a group of workers in firms who have struggled to an unprecedented extent (and likely to be dominated by international tourism-reliant businesses). I think it’s therefore probably fair to say that a quite sizeable chunk of these workers (perhaps as high as 50%) might be losing their jobs without further support.

How this impacts on the unemployment rate will depend to some extent on what happens to participation. However, if we assume a 5,000 loss of jobs, and some related decline in Participation rates, then I see the Cairns unemployment rate lifting to somewhere between 8-8.5% after March (it stood at 5.7% Trend or 5.8% s.a. in December). Although we have seen a big drop in the total on JobKeeper, it is now clear that those left on the scheme come March will be those working for firms in very poor situations who are likely to therefore see a higher proportion of those workers laid off. Recent comments from the Quicksilver CEO reported in the press simply highlight the problem bearing down on the region.

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