A collection of Australia’s leading economists is in rare agreement about the importance of boosting the JobSeeker unemployment supplement to bolster the nation’s recovery from the COVID-19 impact.
On the eve of next Tuesday’s Federal Budget, there is a widespread view that last week’s cuts to JobSeeker unemployment benefit will risk a strong recovery by slowing spending and jobs growth.
Last week, a survey of 49 eminent Australian economists found that the twomost effective Budget options for boosting the economy over the next two years, were more social housing and increasing JobSeeker.
It followed a recent Deloitte Access Economics report commissioned by the Australian Council for Social Service that found the cuts to the Coronavirus Supplement that included JobSeeker, Youth Allowance and parenting payments, would see the economy lose $31.3 billion and 145,000 full-time jobs over the next two years.
Although the old Newstart allowance was effectively doubled when the JobSeeker supplement was introduced in March as part of the broader Government response to the pandemic, the supplement was reduced by $300 a fortnight only last week.
The new rate is scheduled to last only until the end of the year when the old Newstart rate of $40 a day could resume. But there are signs that the Treasurer could be leaving his options open after spirited debates within the Coalition party room about not returning to the old Newstart.
"As a government, later this year, we'll make a decision about further support for people in JobSeeker, but we're leaning in on continuing to provide support as required," Mr Frydenberg said several days ago.
However, in the days leading up to the Federal Budget, there is renewed concern about the wisdom of introducing tax cuts and not boosting the JobSeeker allowance. The view within the community services sector is that the consequences of the pandemic will directly impact the most vulnerable, including single-parent families, particularly single mothers.
But it is also expected that the economic dislocation will create a new group of unemployed, who have never been jobless and will struggle with the economic, social and mental health burden that can accompany that outcome. This is expected to add greater strain to charities, which are confronting increased demand for many of their services but profound challenges to their viability. Recent modelling from the Centre for Social Impact and Social Ventures Australia points to 14 per cent of the nation’s charities becoming unviable and 44 per cent making an operating loss by next September.
Each of the 49 economists who took part The Conversation-Economic Society of Australia survey, was asked to rank their top four effective measures for boosting the economy. 55 per cent ranked boosting social housing as their priority, followed by 51 per cent support for a permanent boost to JobSeeker.
Survey participant Grattan Institute CEO Danielle Wood said: “Increasing the permanent rate of Newstart needed to happen even before coronavirus - any number of groups have made the point that it was punishingly low and left recipients well below the poverty line (however measured).
“Of course, work incentives matter but the rate was so low that it was counterproductive - interfering with job search and job readiness. Boosting the payments now would also be good stimulus because we know that every dollar will hit the economy.’’
Deloitte Access Economics Partner Nicki Hutley said Australians on higher incomes had the option of saving, which many were doing in the face of the pandemic’s uncertainty. “This is why other measures, such as income tax cuts, would not be as effective in getting us out of recession,’’ she said.
“Every dollar that the Government invests in JobSeeker is generating a significant economic return, helping to pave the road out of recession. Providing people without paid work with enough to get by is highly effective economic stimulus as they have little choice but to spend straight away on essentials,’’ Nicki said.