How Australia's unemployment rate could take 14 YEARS to reach pre-virus levels - as the government vows to keep spending until it does

Australia's unemployment could take 14 years to fall back to pre-COVID levels if recession history is any guide.

In February, the month before the coronavirus shutdowns, the national jobless rate stood at 5.1 per cent.

By July, it hit 7.5 per cent - a level unseen since late 1998 during the aftermath of the Asian financial crisis - as the economy sunk into recession for the first time in 29 years.

Treasurer Josh Frydenberg last week told the ABC the government would be providing substantial support for the economy until the jobless rate was 'comfortably under six per cent'.

Australia's unemployment could take 14 years to fall back to pre-COVID levels if recession history is any guide. By July, it hit 7.5 per cent - a level unseen since late 1998 during the aftermath of the Asian financial crisis - as the economy sunk into recession for the first time in 29 years.

On Tuesday night, Mr Frydenberg mentioned 'jobs' 37 times in his Budget speech to Parliament.

'Our plan will grow the economy. Our plan will create jobs,' he said.

Unemployment during the last recessions

Unemployment took 14 years to fall back below six per cent from December 1989, during a period which covered 18 per cent interest rates and the 1991 recession

The jobless rate took eight years to fall below six per cent from October 1981, covering two recessions spanning 1981, 1982 and 1983 - during a drought and a change of government

While unemployment in August fell back to 6.8 per cent, another wave of COVID-19 could see it climb again.

The Treasury Budget papers released on Tuesday night were more optimistic, forecasting the jobless rate falling below six per cent by 2023.

Still, that three-year time frame is a lot faster than previous recessions during the 1980s and 1990s. 

In the lead-up to Australia's previous recession almost three decades ago, the unemployment rate climbed from 5.8 per cent in December 1989, during an era of 18 per cent interest rates, and was at double digits less than two years later.

By December 1992, unemployment hit 11.2 per cent for the first time since the 1930s Great Depression - even though the recession had technically ended 18 months earlier.

The jobless level didn't fall below six per cent until August 2003 - taking 14 years to fall to late 1980s levels.

Unemployment didn't take quite as long to recover following the two recessions of the early 1980s.

The jobless rate rose from 5.9 per cent in October 1981, peaked at 10.5 per cent in June 1983 and fell back below six per cent by August 1989 - an eight-year journey.

The Reserve Bank of Australia on Tuesday left interest rates on hold at a record low of 0.25 per cent but warned unemployment would take several years to fall to pre-COVID levels. 

'Labour market conditions have improved somewhat over the past few months and the unemployment rate is likely to peak at a lower rate than earlier expected,' RBA governor Philip Lowe said.

'Even so, unemployment and underemployment are likely to remain high for an extended period.' 

Before and after the recessions of the 1980s and 1990s, unemployment took eight and 14 years, respectively, to fall back below six per cent. Pictured is the late former prime minister Bob Hawke in 1988 with his treasurer Paul Keating 

In August, the RBA forecast unemployment would peak at ten per cent by the end of 2020 and fall to seven per cent by December 2022.

Treasury's Economic and Fiscal Update released in July had unemployment reaching 8.75 per cent by the end of June 2021.   

Mr Frydenberg's second budget forecast gross government debt surpassing the $1trillion mark by June 2022 for the first time ever.

Government borrowing as a proportion of the economy would comprise more than 50 per cent - something that hasn't been seen since World War II.

This time, the war is on unemployment caused by an invisible enemy.  

Treasurer Josh Frydenberg last week told the ABC the government would be providing substantial support for the economy until the jobless rate was 'comfortably under six per cent'