A need for social distancing to stem the COVID-19 pandemic has led to more than $300 billion in economic stimulus announced by the Australian government. What do the pandemic and its economic effects mean for the Hunter region, at least in an initial overview?
Expert advice here and overseas is imploring the community to heed social distancing to flatten the curve. Global evidence shows us that this call is vital and necessary. State and federal governments have been calling for rolling closures to support this imperative. That makes any business providing services or goods in-situ now highly vulnerable to losing their customer base, cash-flow and ability to operate.
These businesses will experience profound economic impacts that will have flow-on effects throughout communities and regions. Those impacts are the targets of responses announced by federal, state and local governments last week and this week.
The stimulus is directed in part at the three sectors most immediately impacted by last week's closures in this region - retail trade, food and accommodation services and arts and recreation services. They are not the only sectors affected by COVID-19 in the region, though, as impacts will also affect businesses in personal services as well as those reliant on trade, international travel and people movements, such as tourism and education.
Retail trade is the region's third largest industry employing 31,600 people, while accommodation and food services is the region's fourth largest employer with 26,500 workers. A further 3500 people are employed in arts and recreation services.
Together these industries employ around 62,000 people, providing almost one in five jobs (18 per cent) in the Hunter. Given the size and significance of these sectors, the entire region will quickly start to feel the serious economic repercussions from their slow-down.
Looking at a best case projection where one-third of the jobs in these three most impacted sectors are lost, the unemployment rate in the Hunter will rise to 10 per cent. This is more than double the 4.5 per cent unemployment rate that the Hunter Research Foundation Centre reported last month. If half of the jobs in just these sectors are lost, the Hunter's unemployment rate goes up to 13 per cent.
By way of comparison at the height of the wind-back in mining investment, the region's unemployment peaked at 10.3 per cent in March 2015. When BHP closed in the late 1990s, the unemployment rate peaked in 1999 at 12 per cent.
Many of the workers in these three industries are young. Nationally, almost half are under 30 years of age, and 18 per cent are under 20. Even in ordinary times, younger workers generally face double the unemployment rate of Hunter residents overall. Job losses can be particularly challenging for a group that struggles to find a foothold in the labour market and sustain employment.
When you consider the income lost for these workers in moving from paid work to jobseeker allowance, the flow-on effect for the region starts to emerge. Based on national average weekly earnings by industry, if a single person with no children previously employed in retail trade was to rely solely on current income support from the government ($557.50/week), they would face a weekly wage loss of $255.50 per week (not including the one-off $750 Economic Support Payment). The loss would be $295.50 per week for workers in arts and recreation services, and a smaller $17 per week if previously working in food and accommodation services.
The reduced, or ceased, wages for these workers mean a decrease in overall spending in the economy. And as one individual's spending is another's income, the impacts across the entire region's economy will be larger than the job losses that we have seen in recent weeks in these industries.
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Whether the coronavirus impact will be a short and sharp downturn (V-shape) or more protracted (U-shape) is a matter for active debate. General consensus exists, however, that we are headed for a deep recession and that fiscal stimulus is critical.
It is beholden on all of us to understand the likely domino effect when workers suffer a drop in income or are laid off. Falls in spending lead to more job losses, giving rise to impacts across the region. These flow-on effects can be seen to be behind the series of measures that all levels of government and sectors in the Hunter are undertaking to support our region's businesses.
The specific measures announced to date, and others to come, are intended to enable affected businesses to help workers stay in jobs - or retain their relationship with their current employer - and earn incomes. It goes without saying that identifying appropriate targets for these programs and delivering them is no easy task, but it is critical to place the region in the strongest position possible for economic recovery.