Unemployment could peak at 9 per cent in 2010: Oliver

Last week’s unemployment figures were only a taste of what’s to come, according to AMP’s chief economist Dr Shane Oliver.

The latest Australian Bureau of Statistics figures show the unemployment rate in Australia rose to 5.7 per cent in March, with almost 35,000 jobs lost. This is the highest unemployment level in more than five years.

Unfortunately, “slumping job ads and business hiring plans point to more bad news ahead on this front,” Oliver said.

Oliver remains of the view that “unemployment is on its way to a peak of around 9 per cent next year”. This would translate to another 400,000 losing their jobs, with total unemployment rising above one million people.

“This will no doubt take its toll on both consumer confidence and housing finance going forward,” Oliver said.

But he does believe the Government’s recent fiscal and monetary stimulus is working, with consumer sentiment rising solidly in April.

Oliver remains relatively optimistic about the share market.

“Short-term volatility and corrections are inevitable, but we see more upside for shares at least into mid-year,” Oliver said.

“There is increasing evidence that worldwide monetary and fiscal easing is gaining traction and that the severity of the pace of decline in global activity is easing, which of course may be the first step on the path to an eventual recovery from later this year and through 2010.”

Oliver noted that around times of recession “the Australian share market has on average bottomed out around 12-and-a-half months before unemployment peaked”.

Treasurer Wayne Swan also touched on the unemployment issue just prior to the Easter break.

“Sadly, these figures are the inevitable consequence of the worsening global recession which is destroying jobs around the word,” Swan said.

Swan said the US economy is now shedding more than 600,000 jobs a month, with unemployment in that country already 8.5 per cent.

“Unemployment has also risen to 8.5 per cent across the euro area, while in Canada it has reached 7.7 per cent, and in the UK 6.5 per cent,” Swan said.