Unemployment is set to rise to 6.25% over four years, according to the Mid-Year Economic and Fiscal Outlook, possibly sapping disposable income from retail, hospitality and travel.
Unemployment in November was 5.8% according to the Australian Bureau of Statistics, which is expected to rise to 6% this financial year and hold at 6.25% for 2014-15 to 2016-17.
Retailers have expressed concern that the effect of the bad news may be felt as soon as in the next two weeks.
The Australian National Retailers Association chief executive Margy Osmond said the figures “could take the wind out of the last days of Christmas spending”.
Applied macroeconomics and social research fellow at the Melbourne Institute, Dr Viet Nguyen, said the projected conditions could lead to cautious spending in retail, hospitality and overseas travel as consumers avoid luxury purchases.
“Demand is weak because consumers worry about future job prospects, so I think going forward household consumption will be weak as well, so it may have a negative impact on small and medium businesses,” he said.
“When consumers have less to spend they will cut down on things they think are unnecessary,” he said.
But Nguyen said SMEs can attract highly skilled workers in times of higher unemployment.
“In the very good times it’s harder to compete with the big corporations, but now when unemployment is higher there tends to be more highly skilled workers available,” he said.
“When the household demand is weak it affects small to medium businesses, but actually it’s maybe a good time to try to find good and highly skilled employees because they may be abandoned by the big corporations.”