- New Deloitte analysis forecasts the equivalent of 145,000 full time jobs and $31.3 billion will be lost if JobSeeker cuts proceed as planned.
- Its analysis rebukes the Coalition policy to slash the $550 Coronavirus Supplement in September before eliminating it entirely come December.
- Deloitte argues the move would do more harm than good, making little impact on the underlying budget while hampering Australia’s economic recovery.
- Visit Business Insider Australia’s homepage for more stories.
The Morrison government’s determination to begin cutting back the unemployment benefit will only hamper the coming recovery, new analysis from Deloitte argues.
In a comprehensive rebuke of the Coalition policy to slash the $550 Coronavirus Supplement this month and then eliminate it in December, Deloitte economists argue it be kept ‘stronger for longer’ or risk setting off more economic carnage.
To be exact, slashing JobSeeker would bleed $31.3 billion from the economy and cost the equivalent of 145,000 full-time jobs over the next two years.
“Removing the Coronavirus Supplement from JobSeeker payments in isolation won’t make a material difference to the future path of Australian Government debt. But doing so too quickly and without a plan to address the reduction in incomes could make a material difference to the economy,” the report said.
The report, prepared for the Australian Council of Social Service (ACOSS), argues then that the Coalition’s current timeline threatens to do more harm than good, casting doubts on the government’s claims of fiscal responsibility.
Meanwhile, its argument that JobSeeker discourages people from finding work doesn’t carry water, as more than one million Australians compete in a rapidly shrinking job market.
“With large numbers of people seeking paid work competing for scarce job vacancies, higher unemployment payments are likely to have very little impact on the level of employment in the short term,” the report said.
While the JobKeeper payment is officially a support measure to keep Australian heads above water, it’s also a stimulus measure, as recipients pump the money straight back into the real economy.
It stands to reason that the decision to cut $23 billion of government spending during “a deep recession” comes with heavy costs.
In June, Australia recorded its largest economic decline on record, with the economy shrinking 7%. It’s evident that would have been far worse had it not been for record government spending. With JobSeeker slated to shrink back to Newstart levels by December, and JobKeeper to disappear by March, a return to growth is hardly guaranteed.
As Indeed Asia-Pacific economist Callam Pickering reflected on the June GDP figures, he noted, “This economy is being held together with duct tape by JobKeeper and JobSeeker.”
In Victoria, where extended lockdown measures are going to result in higher unemployment numbers for longer, the slashing of JobSeeker will only be worse. Given its state economy makes up nearly a quarter of the national one, its pain will be felt right around the country.
To its credit, the speed and breadth of the original policy are to be celebrated. In June, an estimated 2.6 million Australians were living in poverty. If it weren’t for JobSeeker and JobKeeper, it’s estimated that number would have more than doubled to 5.8 million.
In fact, it not only prevented millions from falling into poverty but helped pull 400,000 out of it. However, if the Morrison government proceeds to cut support measures, it’ll be short-lived relief, according to analysts.
Deloitte’s report cites research from the Australian National University (ANU) Centre for Social Research and Methods which shows the number of “persons in poverty [is expected to] increase by 740,000” as a result of the reduction in the supplement slated for September.
In other words, there will be more than 200,000 more Australian living in poverty by next month than there was back in February. That’s before the supplement disappears entirely in December.
As the ranks of people in poverty and unemployment swell, the recovery effort will only be made harder.
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