Friday, April 24, 2009

Could Australia's unemployment rate hit 10 per cent?

It has jumped from 3.9 per cent to 5.7 per cent in just over a year.

But double figures?

The Treasurer thinks it's possible.

Here's what Michelle Gratttan asked him just before he left for a G20 meeting:

Q: Is there a risk that unemployment could hit double digit figures?... There’s no guarantee we won’t get back to those early ’90s levels?

A: There’s no guarantees when you are in the middle of the most savage global recession since the Great Depression.

Here are two reasons why the Treasurer could well expect a double-digit unemployment rate.

1. History suggests that a jump of 5 percentage points is typical in an Australian recession:

2. Bill Mitchell has done the numbers using the IMF's forecasts for Australian GDP which have it shrinking 1.4 per cent this year and inching forward 0.6 per cent next year.

He comes up with an unemployment rate of 10.04 per cent: