The federal government will have to continue to provide substantial support for employment and economic activity well beyond the six-month lifespan of the JobKeeper program, economists have warned.
A sharp slowdown in the rate of COVID-19 infections has raised hopes that some of the brakes on the economy may soon begin to be eased.
But the extent of the national and international economic downturn meant the government will need to provide billions of dollars of more support well beyond September.
Treasury has forcecast the unemployment rate to reach 10 per cent in the June quarter, but the Grattan Institute said the JobKeeper scheme might be partially obscuring the actual extent of the problem and up to 26 per cent of all workers - 3.4 million people - may be out of a job in coming weeks.
Grattan Institute economist Brendan Coates said that even if Australia was able to eradicate COVID-19 in the next two to three months, the economic damage caused in responding to the virus was severe.
Mr Coates said the not only would there be a big legacy of joblessness, particularly among women, young people and those who have been in low-income employment, but many of those who have managed to hold on to their job or business will be saddled with debt, reducing their capacity and willingness to spend.
In such an environment, the federal government would have to move gradually in winding down the $130 billion JobKeeper program, for which more than 900,000 businesses have registered.
"We will have to transition out of that policy very carefully," Mr Coates said, suggesting access to the scheme might need to be incrementally scaled back over several months.
National Australia Bank chief economist Alan Oster has forecast unemployment to reach 11.75 per cent and stay high "for a very long time".
Mr Oster said said the government would find it hard to wind back the JobSeeker payment, which is double the Newstart allowance, because to do so would be to remove stimulus from the economy right when it was needed, so the government would likely find itself paying many extra billions in jobless support alone.
NAB economists expect an 8 per cent peak to trough fall in gross domestic product this year, and even with a rebound in growth later in the year Mr Oster said the economy would not return to the size it was at the end of 2019 until mid-2022.
He said the government would need to do more when the economy began to recover because a lot of the measures it has taken so far do not last long.
"I am definitely not in the camp that says, 'Oh, you've blown the deficit, this is terrible'. I think you need to," Mr Oster said. "I think they have a lot more to do".
Melbourne University economist Jeff Borland said that although the slowdown in the rate of virus infections was promising, many parts of the economy were likely to be still in full or partial shutdown when measures like the JobKeeper program were due to end, leaving the government little option but to continue to provide support in some form.
Professor Borland said the government will be under pressure to maintain the JobSeeker payment at its current level because "it is very difficult to make the logical argument that the level of support needed in the downturn is higher than is needed after it".
But Mr Coates said it would be equally hard for the government to maintain JobSeeker payments at a level that was currently in excess of the age pension.
Even if the country is able to eliminate the virus in coming months and restart many sectors of the economy, few economists expect growth and employment to snap back.
Professor Borland said social distancing constraints were only likely to be eased gradually, limiting the rate at which people are able to get back to work.
Meanwhile, those in work will be more focused on paying down debt than shopping and eating out.
"As this episode goes on, lots of people are losing income and are going to have to rebuild their savings," Professor Borland said.
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