Phasing out JobSeeker puts 145,000 Australian jobs on the line

A new report has warned that Australia’s phasing out of Government support during the coronavirus pandemic could see the country’s recession deepen. Having lapsed into its first technical recession in three decades, Australia’s economy could lose out on $31 billion thanks to the cuts to the JobSeeker job protection programme, which could jeopardise 145,000 jobs.

At times of economic crisis, government spending can be crucial in lessening the shrinkage of GDP, and prompting a recovery phase. As a result, governments around the world are set to continue sinking billions in public funding into supporting consumers and businesses throughout the current pandemic and recession. There are some notable exceptions, however.

While the UK Government maintains that it will end its current job protection scheme in October, Australia’s Government has also announced that it will be cutting back on state support for its citizens amid the crisis. The national JobSeeker Payment system (formerly known as NewStart) pre-dates the Covid-19 outbreak, however during the pandemic the social security payment for Australia’s unemployed had been roughly doubled – as more and more people faced losing their jobs as a result of a health crisis well beyond their control.

Before the outbreak, the Scott Morrison Government had already commenced a sustained attack on Australia’s welfare system, looking to cut JobSeeker Payments under the mantra that “the best form of welfare is a job.” The standard neo-liberal outlook on state support for the unemployed is that it takes away their incentives for finding employment – but as the nation tried to stop the spread of coronavirus, this was seen as irresponsible.

Now, however, the Australian Federal Government is looking to slash the payment back to its pre-pandemic rate of $565 a fortnight – well below the poverty line. In anticipation of the reduction – scheduled for the end of September – a new report has warned this move could prove disastrous for Australia’s economy.

According to a study by accounting and consulting giant Deloitte – commissioned by the Australian Council of Social Service – cutting the $565-a-fortnight coronavirus supplement would “harm the economic recovery and decrease both GDP and employment across Australia.”

Deloitte said that reducing the supplement in two weeks, before removing it entirely after Christmas, would drastically impact the spending power of consumers during a recession – something which would “hurt more than if the economy were in good shape.”

The resulting impact could reduce the size of the economy by $31.3 billion, and cost the equivalent of 145,000 full-time jobs over the next two years – with the crisis deepening in 2021-22, as more consumers would have been placed in a position where they would depend on the meagre JobSeeker Payment system – in turn leading them to spend less.

An average reduction in employment of around 1.28% during the period would see most of the employment losses occur in 2021-22, Deloitte confirmed. In contrast, every dollar the Government invests in the JobSeeker Payment produces a significant economic return.

Spelling out the Keynesian ideas underpinning the social security systems which many governments had decimated before this crisis, Deloitte Partner Nicki Hutley explained the support payments would help to “pave the road out of recession.” She added, “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. People on higher incomes have the option of saving, which many are doing right now given the uncertainty of the pandemic.”

As with most national economic measures, these impacts of the JobSeeker cuts will differ considerably across and within Australia’s states and territories. Overwhelmingly, the regions most impacted from the removal of the Coronavirus Supplement are those already experiencing the most hardship, such as the regional Northern Territory and Western Australia.

In Victoria, elevated case numbers and the extended lockdown restrictions are likely to result in higher unemployment figures than elsewhere. As such, the removal of the Coronavirus Supplement is expected to be more damaging.