Dr Kennedy conceded there might be softness for some time in sectors such as aviation, arts and recreation, and education but the broader economy was being buoyed by high-spending consumers.
The gradual withdrawal of government support, such as the end next month of the JobKeeper wage subsidy and the $150-a-fortnight coronavirus supplement for people on welfare payments such as JobSeeker, is likely to have an impact on the recovery.
Dr Kennedy said some people would lose their jobs and probably move on to JobSeeker once JobKeeper ended, noting there had been a drop-off in the number of people on the latter when the subsidy was reduced in October.
“I’d expect it will mean there is some people whose employment won’t be present, job losses that would come of that. As there was in the move from JobKeeper II to JobKeeper I,” he said.
Research by consultancy firm EY, released on Friday, shows a large number of Australians reliant on JobKeeper and JobSeeker are fearful about what happens in late March.
It found while 24 per cent of those surveyed think they will be worse off when the programs end, among those on JobKeeper or JobSeeker that jumped to 58 per cent. Six in 10 fear they will lose their jobs.
Of those on JobKeeper, a net 74 per cent say they are saving extra cash in preparation for the program’s end while 61 per cent believe they will have to borrow money to get by.
EY Australia chief economist Jo Masters said while JobKeeper could not continue indefinitely, there were many people worried about their financial circumstances.
“There are concerns about paying the bills and as a result, these Australians are trying to save more now to lessen the pressure on the household budget post the end of March. This is one of the challenges the government is facing as it seeks to balance continuing on the path of economic recovery while also winding back its support measures,” she said.
There are about 500,000 businesses on JobKeeper, supporting 1.6 million jobs, with $83 billion already spent on the program.
The federal government is facing a record $198 billion deficit this year with forecasts gross debt will go beyond $1 trillion early next decade. Debt is already at an all-time high of $811 billion.
Senator Simon Birmingham, in his first major speech since taking over as Finance Minister, will today reveal the long term impact of that debt if interest rates start to climb.
In an address to the Australia-Israel Chamber of Commerce in Adelaide, Senator Birmingham will argue that if interest rates return to more normal levels over the next 10 years it would cost taxpayers an extra $44.5 billion in interest payments.
The global recession had driven down interest rates to record low levels but that could change.
“The circumstances may have necessitated a dramatic shift in budget strategy over the last 12 months but the fact remains that governments should only spend what is necessary,” he said in a draft copy of his address.
“Australians should want our country, including its balance sheet, to be as capable of responding to the next crisis as we have been to this one.”
The government is facing growing attacks from Labor over its handling of the recovery, particularly around the next increase in the 9.5 per cent superannuation guarantee.
Shadow treasurer Jim Chalmers will tell a national superannuation conference the government should be looking to boost wages – currently growing at record low rates – and the retirement incomes of working Australians.
“We welcome a big national conversation about this; about jobs and wages, about super and retirement incomes, about the right kind of recovery,” he will say.
“We’d prefer some kind of bipartisan consensus but if that’s needed here is a clash of political armies, then so be it.”
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.