Labour market data were stronger than expected in October and the easing of restrictions has lifted spirits, as well as consumer and business confidence. Recent positive news around the apparent effectiveness of COVID-19 vaccines has also boosted confidence, although production and distribution challenges, as well as the ultimate uptake rate of the vaccines, may pose some downside risk to the outlook.

Nevertheless, there is considerable stimulus in the system, as well as incentives for firms to employ and invest. That said, considerable uncertainty continues to surround the labour market outlook. The 2020-21 Budget forecast the unemployment rate to peak at 8.0% in the December quarter 2020, before declining to 7.25% in the June quarter 2021 and to 6.5% in the June quarter 2022.

A legacy of this pandemic, however, may be an extended period of unemployment (and indeed long-term unemployment) beyond this horizon that is substantially higher than pre-COVID-19 levels.