Australia's unemployment rate falls to 6.8% – but more Victorians are out of work

Australia’s employment rebounded with 111,000 more jobs in August compared with July, but more Victorians are out of work due to the state’s second wave of Covid-19 and Melbourne’s stage-four lockdown.

The Australian Bureau of Statistics labour force data, released on Thursday, confirms Australia’s two-speed economy, with unemployment falling overall by 0.7% to 6.8% but rising in Victoria to 7.1% after the loss of 42,400 jobs.

The treasurer Josh Frydenberg told reporters in Canberra that although the figures show Australia’s economy is “remarkably resilient” and “fighting back”, the road to recovery will still be “long, hard and bumpy”.

The effective unemployment rate – including those who had left the labour market or worked zero hours – fell from 9.8% to 9.3% but “still remains high”, he said.

Before the release Scott Morrison defended the government’s decision to reduce jobkeeper wage subsidies and the coronavirus supplement from late September, suggesting they would be boosted by new job creation initiatives in the October budget.

Employment increased by 0.9% in August, the ABS found, but hours worked rose by just 0.1%. In Victoria hours fell by 4.8% compared with a 1.8% increase across the rest of Australia.

The rebound in jobs was stronger for women, with 67,000 more in work compared with 44,000 men.

Related: Cut to jobseeker payment estimated to cost Australian economy $31bn

Despite the improvement in unemployment, the underemployment rate remained at 11.2%, 2.4% above the level in March. The underutilisation rate, which combines the unemployment and underemployment rates, fell 0.7% to 18.0% but remained 4.7% higher than March.

The 111,000 boost to employment in seasonally adjusted terms resulted from a net increase in employment of 44,500 between July and August. This was driven by a surge of owner-managers without employees returning to work (50,200), dwarfing the minimal growth in the number of employees (up 2,600).

Employment grew in all states and territories except Victoria in August:

Victoria also has the highest proportion of employed workers on zero hours (3.5%):

At the Covid-19 Senate inquiry hearing, Labor targeted the government over its decision to cut jobkeeper and jobseeker by $300 a fortnight from late September, with bigger cuts for part-time workers.

A Deloitte report released this week warned that reducing the coronavirus supplement would cost the economy $31bn and the equivalent of 145,000 full-time jobs over two years.

According to the McKell Institute, cuts to jobkeeper will take $9.9bn out of the economy by Christmas with a $1.52bn reduction in fortnightly support.

Earlier Morrison told reporters at BlueScope Steel in Port Kembla that jobkeeper needed to be reduced because “keeping the Australian economy on life support” was not sustainable, costing $11bn a month.

Related: Jobkeeper cuts to strip $9.9bn from Australian economy by Christmas, report says

The government would use next month’s budget to announce “a lot of new plans, a lot of new initiatives, that will see us grow out of this Covid recession”, the prime minister added.

“We know the effective rate of unemployment is well over 10% and can peak a lot higher than that … Treasury advises it’s going to stay up around that 14% mark.

“It was falling before the Victorian wave hit us, and with Victoria opening up again we would expect to see that fall again.”

Labor’s shadow employment minister, Brendan O’Connor, said it welcomed the reduction in the unemployment rate but is concerned the figures “would convince the government not to do enough to help our economy and to help the almost 1 million Australian workers still out of work”.

“The government is foreshadowing that in just 10 days time they’re going to rip billions of dollars out of the economy, which could have very adverse effects on businesses and indeed on employment.”

On Wednesday, the OECD updated its forecasts for Australia’s economy, finding it is set to shrink by 4.1% in 2020, a 0.9% improvement on its June forecast, but grow by just 2.5% in 2021, down 1.6% on projections, indicating a slower recovery.

Frydenberg said the government would outline “the next stage of the jobmaker plan” in the October budget with a focus on tax, industrial relations, cutting red tape, energy, skills and infrastructure.

Luke Yeaman, the deputy secretary of Treasury’s macroeconomic group, told the inquiry that “in isolation” it was “undisputed” that tapering the jobkeeper and jobseeker rates “will take some income out of the economy”.

But Yeaman argued that “across large parts of the country”, except Victoria, economic indicators including the labour market had improved.