The huge hit to the economy will reverberate through the jobs market. Unemployment is expected to average 7.6 per cent this year before increasing to 8.9 per cent through 2021.
That would leave Australia with a jobless rate around the average of continental Europe and well above comparable nations such as New Zealand (6.8 per cent), Britain (4.4 per cent) and Canada (7.2 per cent).
IMF chief economist Gita Gopinath said the global economy was likely to contract by 3 per cent this year after growing by 2.9 per cent through 2019.
She said the slowdown was like no other on record, as economies were being closed to prevent the spread of the coronavirus.
“It is very likely that this year the global economy will experience its worst recession since the Great Depression, surpassing that seen during the global financial crisis a decade ago,” she said.
“The Great Lockdown, as one might call it, is projected to shrink global growth dramatically.”
The fund marked out Australia and a handful of nations for their “swift and sizeable” fiscal responses to the pandemic, but cautioned even more money may be needed if the virus continues.
“Fiscal measures will need to be scaled up if the stoppages to economic activity are persistent, or the pick-up in activity as restrictions are lifted is too weak,” she said.
Modelling for the federal Treasury has found Australia’s unemployment rate is likely to peak at 10 per cent in the June quarter. It is currently 5.1 per cent.
Treasurer Josh Frydenberg would not be drawn on how long it would take for unemployment to fall from its peak, but said on Tuesday the government would focus on ways to re-energise the economy to boost the jobs market.
“I believe that more jobs will be created on the other side of this crisis. I think there will be the recovery phase, Australia will be well positioned for that,” he said.
“But there are certainly some challenges ahead.”
One of those challenges was highlighted in NAB’s monthly business survey, which found a total collapse in confidence and trading conditions across the nation through March.
It also found a sharp fall in cashflow with businesses dramatically scaling back their capital expenditure plans.
Opposition leader Anthony Albanese said the government would have to reconsider its plans to end the $550 JobSeeker supplement, which is due to end in mid-September.
He said the government had conceded through the JobSeeker supplement that the old Newstart allowance, at $40 a day, was not enough to live on.
“It’s clear to me that the idea that you would just return back to $40 and do it in a way which the prime minister implies with snap back, you do it instantly, would provide a massive shock to the economy,” he said.
Sign up to our Coronavirus Update newsletter
Get our Coronavirus Update newsletter for the day’s crucial developments at a glance, the numbers you need to know and what our readers are saying. Sign up to The Sydney Morning Herald’s newsletter here and The Age’s here.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.