Cuts to the JobSeeker COVID-19 supplement could cost 40,000 jobs, says Grattan Institute

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Up to 40,000 Australians could lose their jobs after the federal government cuts the JobSeeker payment from April, according to new analysis.

The Grattan Institute think tank says the government’s decision to cut unemployment benefits on April 1 will suck about $5 billion out of the economy in the coming year.

It said it would likely push the unemployment rate higher by 0.1 to 0.15 per cent, because of the hit to spending.

“If the federal government really wants to get more Australians working, it should think again,” said Brendan Coates, household finance program director at the Grattan Institute.

“Cutting unemployment benefits in the middle of a recession is likely to cost jobs, rather than create them.”

Federal government to cut unemployment benefits next month

From April 1, the federal government will be increasing the baseline rate of JobSeeker by $25 a week (or $3.57 a day).

Prime Minister Scott Morrison says the new baseline rate will make it equivalent to 41.2 per cent of the national minimum wage.

However, at the same time, his government will be abolishing the $75-a-week Coronavirus Supplement to JobSeeker.

That means that, overall, people receiving JobSeeker payments will see their unemployment benefits cut by $50 a week from where they are at the moment.

Peter Whiteford from the Crawford School of Public Policy at the Australian National University, who is a leading expert on Australian social policy, says the changes will take Australia’s pre-pandemic unemployment payments from the lowest in the OECD to the second-lowest, after Greece.

“When the maximum rate of the Coronavirus Supplement was briefly in force in 2020, Australia moved to around the OECD average,” Professor Whiteford wrote this week.

Little evidence retaining the Coronavirus Supplement will hurt employment

Mr Coates said even if the $75-a-week Coronavirus Supplement to JobSeeker was to remain in place, the overall level of JobSeeker would still be worth just half the national minimum wage.

“Hardly a meaningful disincentive to work,” he wrote.

“JobSeeker is one of the best forms of fiscal stimulus there is: unemployed people are likely to spend all, or at least most, of what they receive.

“In January this year, 80 per cent of people receiving the Coronavirus Supplement said they were spending it on household bills and supplies, including groceries.

“That’s money in the pockets of Australian businesses, big and small.

“Cutting unemployment benefits by $50 a week will take about $5 billion out of the economy in the coming year.”

Mr Coates said that would likely push the unemployment rate 0.1 to 0.15 per cent higher than if the current $75 a week supplement were kept.

“And that means up to 40,000 fewer jobs,” he said.

Emma Dawson, the executive director of the Per Capita think tank, said the Grattan Institute’s analysis was correct.

“I think he’s spot on,” she told the ABC.

“Removing that money from the economy is not a good idea. Every cent of it is being spent at the moment because these people don’t have capacity to save.

“It’s not only cruel but economically it’s the opposite of what we need to do.”

In a recent submission to a federal parliamentary inquiry, Per Capita called for Jobseeker to be increased by $250 a fortnight from its pre-pandemic level.

Treasurer declines to comment

Treasurer Josh Frydenberg was contacted for comment, but a member of his staff declined.

Instead, his office referred the ABC back to comments Mr Frydenberg gave earlier this week when he appeared on Channel 7’s Sunrise program, with presenter David Koch.

During that program, Mr Koch asked Mr Frydenberg if he thought the level of JobSeeker was satisfactory.

Mr Frydenberg said JobSeeker “has never been seen as a replacement wage” and the planned $50 fortnightly increase to the baseline of JobSeeker was “the single biggest increase … since 1986.”

“Our focus is to move people off the JobSeeker payment, Kochie, and into work,” Frydenberg said.

Mr Whiteford said the government’s increase in the baseline rate of JobSeeker, by $25 a week, represented an increase of 9.7 per cent.

“During the Hawke and Keating administrations the payment increased 23 per cent in real terms, under Whitlam it increased more than 50 per cent,” Mr Whiteford said.

By business reporter Gareth Hutchens (Original ABC Article)

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