Aussies told to brace for more job losses
The Reserve Bank of Australia has warned the unemployment rate is set to boom as more Australians return to the job market.
Addressing the Anika Foundation Luncheon on Tuesday, RBA governor Philip Lowe said confidence within the labour market was a concern, despite improving economic conditions.
"As the labour market continues to improve, we expect many of these people will start looking for jobs and thus be classified as rejoining the labour force," he said.
"This will push up the measured unemployment rate at the same time that the share of the working-age population with a job is also rising."
Unemployment for the month of June rose to 7.4 per cent despite 210,000 people becoming newly employed.
Mr Lowe also welcomed the extension to JobKeeper and JobSeeker payments to March 2021, saying government spending was crucial to limiting the long-term economic damage caused by COVID-19.
Dr Lowe said the impact of the virus would cast shadows over the Australian economy for years to come, with higher government debt necessary to curb the damage caused to business and consumer confidence.
"We need to do what we can to limit the severity of these costly scars," Dr Lowe said.
"When the time does come to address the build-up of debt, the best way to do this will be through economic growth."
The low interest rate environment caused by the pandemic had enabled borrowing to be at its lowest point since federation, Dr Lowe said.
In his speech, Dr Lowe said the move to negative interest rates in the Australian economy was "extraordinarily unlikely" as further downward moves would impact the supply of credit.
The RBA also noted its attempts to provide the economy with ample liquidity during the downturn through its bond repurchasing program had lifted the central bank's balance sheet to about $280 billion from $180 billion.
The increase in cash reserves enables the RBA to provide low-cost funding to the banking industry in order to support cheaper credit to consumers.
Dr Lowe also raised concern the exchange rate of the Australian dollar was too high and would ideally like the currency to depreciate in an attempt to support exports and jobs.
Dr Lowe said the RBA would not intervene in the price of the dollar with the currency value to be determined on market forces.
Originally published as Aussies told to brace for more job losses