The ACT experienced its highest unemployment rates in more than 20 years this year, according to a new report, but the Territory is on track to recover.

SGS Economics & Planning’s annual economic analysis, Australia’s Economic Wellbeing, states that the ACT avoided a COVID-led recession in 2020, due to public service stability.

The ACT is unique among the states and territories in having Public Administration and Safety as its largest industry (around 30 per cent of its economy), explained Dr Marcia Keegan, the report lead author. The public service is less cyclical than other industries that drive state economies, such as mining, tourism, and agriculture.

Even in the first round of COVID-19, Dr Keegan said, there was “a bit of an uptick” in the economy.

“Someone had to process all the unemployment payments; someone had to do all the analysis behind JobKeeper. Those jobs and the main driver of ACT economic activity were still going, even as some other industries were closing down. So having that really stable industry base of public administration and safety is quite helpful.”

‘Severe labour force shock’

But this August, the ACT suffered “a severe labour force shock”: workforce participation fell to 79 per cent (from 82.7 per cent in June, and an October 2020 high of 85.6 per cent), and unemployment rose to 6.2 per cent – the highest rate since 1999.

State final demand declined by 1.6 per cent in the September quarter, and overall economic growth in 2020–21 slowed to 2.8 per cent (still more than the Australian average).

Other sources predict that the ACT’s deficit will reach $951.5 million in 2021–22 (almost $477 million more than predicted earlier this year), and the ACT government’s net debt will increase from $5.7 billion in 2021–22 to $9.6 billion by 2024–25.

But Chief Minister Andrew Barr has said the economy would rebound – “a V-shaped economic recovery”, given 2020–21 had been a year of strong growth. October’s Budget was “a full-throttle Budget” to “turbo-charge” the ACT’s economic recovery; it includes what the government calls the largest infrastructure program in the Territory’s history.

Dr Keegan told Canberra Daily she believed the general outlook for the ACT was good, and Mr Barr’s ‘V-shaped recovery’ was on the mark.

The downturn was entirely due to restrictions on activity, Dr Keegan said. “Now that activity can be undertaken again, all the economic activity associated with that is going to bounce back.

“A possible risk is seeing how this Omicron variant unfolds; at the moment, everything is still very up in the air. We don’t know how effective the current vaccine is. So we’ll just have to see – but at the moment, the signs are looking pretty positive.”

Already, Dr Keegan said, the ACT has seen retail trade growing and an uptick in jobs in October. “We’re starting to see some green shoots in economic indicators.”

The most recent Single Touch Payroll release (13 November) showed a rebound in jobs as restrictions eased in October; payroll jobs increased 4.6 per cent in the month since 16 October, and wages increased 1.9 per cent.

Dr Keegan expected to see job numbers grow in the ACT once the impact of reduced restrictions in late October and November shows up in employment numbers.

Retail trade rose 20.2 per cent in October, and Mr Barr predicted this would continue in the lead-up to Christmas. Dr Keegan expected another increase with discretionary retail completely open for all November, and Christmas coming up.

The SGS report also shows that Professional, Scientific and Technical Services grew as a share of the ACT’s total economic activity over the last decade. The sector (commonly engaged to support the public sector, as well as to manufacturing and business) grew 126 per cent in the last decade, from the sixth largest economic contributor in 2010 to the second largest contributor to the economy today. Public Administration and Safety, meanwhile, slightly declined from 32 per cent of the economy in 2013 to 30 per cent this year.

“To some extent, Professional, Scientific, and Technical Services cover engineers, architects, specialists – but in the ACT, a lot of people who work in [the sector] provide consulting services to governments. In some cases, it may be that consultants are doing work that supplements the public service,” Dr Keegan speculated.

ACT Government response

“The ACT’s economy was in the best possible position to spring back,” said an ACT Government spokesperson.

The ACT had weathered the impact of COVID-19 and associated lockdowns; the October budget showed the ACT economy remained in a strong position after two consecutive years of growth; and high vaccination rates, eased restrictions, and the reopening of domestic borders put the ACT in a good position, the spokesperson said.

“Consumer spending has rebounded strongly as restrictions have eased. With international borders gradually reopening, our tourism and international education sectors are also expected to drive growth into 2022 and beyond.

“However, it’s clear that the pandemic hit some sectors harder than others, and the resulting challenges faced by some businesses have been significant.”

The spokesperson said the ACT Government was investing in projects and programs to support the ACT’s economic recovery and the future wellbeing of all Canberrans.

The ACT Government’s Recovery Plan brings together the key measures to ensure a sustainable and equitable recovery for the ACT.

The 2021-22 Budget extended initiatives to ensure that Canberrans and local businesses would continue to receive the support they need:

• the $29.5m Jobs for Canberrans Fund to find employment for those who lost jobs due to COVID-19;
• residential and commercial tenancy support measures, including rebates and mediation support;
• a suite of COVID-19 business support grants, specific measures for the tourism, accommodation, arts and events sectors, and extended licence and fee waivers; and
• a $26 million mental health and community supports package.

“The ACT Government will continue working with the community to make sure Canberra returns even stronger, together,” the spokesperson said.

Political response

Elizabeth Lee, leader of the Canberra Liberals, said: “The Canberra business community was hit very hard during the lockdown, and the impacts will be felt by so many for some time.”

She noted that unemployment rose to 6.6 per cent in October, “the highest jump in unemployment anywhere in Australia”.

“While there is some confidence the Canberra economy will be boosted in the lead-up to Christmas, there are still many businesses continuing to do it tough.

“The ACT Labor-Greens Government bungled the business support grant scheme, with some businesses forced to wait more than seven weeks for much-needed urgent payment, which is unacceptable. Others were put through the wringer with eligibility changing unilaterally and businesses being forced to provide the same information multiple times.

“Coming out of the lockdown, the Labor-Greens Government continued to impose restrictions on local businesses, despite the ACT reaching 90+ per cent fully vaccinated, resulting in a farcical situation where Canberrans were able to freely cross the border to do their shopping whilst not being able to go to their local shops.

“It was very clear despite the Labor-Greens Government telling Canberrans they were prepared and would be ready in the case of a lockdown, that was not the case, and our business community have, and some will continue to, pay the price.”

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