The Australian Labour Market and the Early Impact of COVID‐19: An Assessment

• Author: Andrew Charlton,Jeff Borland
• DOI: http://doi.org/10.1111/1467-8462.12386
• Published date: 01 September 2020
• Date: 01 September 2020

The Australian Economic Review, vol. 53, no. 3, pp. 297–324 DOI: 10.1111/1467-8462.12386

The Australian Labour Market and the Early Impact of

COVID‐19: An Assessment

Jeff Borland and Andrew Charlton*

Abstract

From March to June 2020 was the most

dramatic four months in the history of the

Australian labour market. Never before has a

such a substantial decrease in labour demand

(and partial reversal) occurred so quickly. In

this article, we present an overview of the

early impact of COVID‐19: the main drivers it

brought into play and the consequent labour

market developments. Aggregate effects and

how impacts differed by type of job and

worker are described. We conclude with a

brief review of the main government response

to COVID‐19, the JobKeeper program.

1. Introduction—The Three Graphs that

Tell the Story

Every recession is different. Some, however,

are more different than others. So it is with the

COVID‐19 recession in Australia. With its

origins in the onset of the virus, and the rapid

pace of change thereby engendered in the

labour market, thus far it bears little resem-

blance to past recessions.

1

Only four months

in, already there is as much to describe and as

many questions to answer as might usually

have accumulated after several years.

With so much to take in, and with the

striking character of what is underway, the

story of the COVID‐19 recession is being told

through the ‘big’graph. In that vein, we begin

our overview of developments in the

Australian labour market with three graphs

to summarise the early impact of COVID‐19.

Figure 1 shows changes in monthly hours

worked in Australia from March to June 2020

compared with the 1980s and 1990s reces-

sions. Monthly hours worked is the best way

to describe changes in labour demand during

the period when the JobKeeper program is in

place, because its operation is artificially

increasing the number of persons counted as

employed.

2

Obviously notable are the scale and speed

of decrease in monthly hours worked. In

previous recessions, hours worked gradually

declined over 18 months to reach a trough

about 6 per cent below the start of the

recession. In the current episode, hours

worked fell by 9.5 per cent in just one month,

from March to April; and then fell again by

0.9 per cent from April to May. From May to

* Borland: The University of Melbourne, Victoria 3010,

Australia; Charlton: AlphaBeta, Sydney, Australia.

Corresponding author: Borland, email <jib@unimelb.

edu.au>. We are especially grateful to Ian McDonald,

whose comments have greatly improved the article. We

also thank Ross Williams and participants in webinars

hosted by Social Ventures Australia, the Economic

Society of Australia, Alpha Beta, the Victorian

Department of Jobs, Precincts and Regions, the National

Skills Commission and Universities of Melbourne and

Western Australia, for many helpful comments. The paper

cites anonymised and aggregated data from Xero,

released as part of its Small Business Insights Program.

Jeff Borland's research has been supported by ARC

Discovery Grant DP160102269.

© 2020 The University of Melbourne, Melbourne Institute: Applied Economic & Social Research,

Faculty of Business and Economics

Published by John Wiley & Sons Australia, Ltd

June, monthly hours worked rebounded by 3.6

per cent. Those magnitudes of increase and

decrease in hours worked in a single month

have never been previously observed (at least

since the start of this Australian Bureau of

Statistics (ABS) data series in 1978).

ThesamefeaturesoftheCOVID‐19

recession stand out, even from a longer‐run

historical perspective. Figure 2 shows the

rate of unemployment in Australia from the

start of the twentieth century onwards,

including an average rate for April to June

2020. The average for April to June is an

adjusted rate, constructed by the ABS to be

historically comparable (by correcting for

the impact of the JobKeeper program). That

average rate was 10.0 per cent; up from 5.4

per cent in March.

3

The only extended

periods with a higher rate of unemployment

have been during the Great Depression and

in the early 1990s. In neither of those

episodes did the rate of unemployment rise

as quickly.

Figure 3 shows changes in the number of

jobs in Australia from mid‐March to early

July. The series displayed are from two data

sources: (1) ABS/Australian Taxation Office

(ATO) Payroll data—which shows employee

jobs reported to the ATO through the Single

Touch Payroll system; and (2) Xero Small

Business Insights (SBI). Appendix 1 provides

a brief overview of the main sources of data

used for this study.

The ABS/ATO series shows that the

number of jobs in Australia fell rapidly from

21 March to 18 April, then gradually in-

creased to 20 June, and after that again

decreased through to early July (partly due

to job losses in Victoria with the re‐emergence

of COVID‐19). By early July the number of

jobs was about 3.5 per cent below its level in

mid‐March, having regained more than half

the initial decrease. The Xero SBI series

shows that the initial decrease in jobs in small

business was larger than for all businesses;

and the recovery from mid‐April is not

evident.

Other important features of the COVID‐19

recession are apparent from Figure 3. One is

that this is the first major economic downturn

in Australia where (almost) real‐time weekly

data on labour market outcomes are available.

These data have become available with online

reporting to the ATO for tax collection

Figure 1 Changes in Monthly Hours Worked from the Start of Recessions

Source: Australian Bureau of Statistics, Labour Force Australia, Cat. no. 6202.0, Table 19. 1980s recession start date =

September 1981; 1990s recession start date =July 1990; Now recession start date =March 2020.

298 The Australian Economic Review September 2020

© 2020 The University of Melbourne, Melbourne Institute: Applied Economic & Social Research, Faculty of Business

and Economics