Right: Prime Minister Morrison and Treasurer Frydenberg have warned that the Jobseeker payment, along with other benefits countering the Coronavirus-caused financial crisis, were never meant to be permanent.
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The JobSeeker unemployment benefit should not revert to the NewStart allowance
1. The increased benefit paid under JobSeeker has revealed the inadequacy of the NewStart allowance
Critics of the rate of benefit supplied under the former NewStart allowance have argued that the doubled payments given by JobSeeker have revealed the inadequacy of the NewStart payments.
Greens Senator Rachel Siewert has stated, 'The cruelty of low-income support rates has been laid bare by this pandemic How can it be government policy for people to live below the poverty line?'
Senator Siewart has further stated, 'An increase to the JobSeeker payment must be long term and permanent. It is absolutely untenable to drop people back onto $40 a day once this crisis period has passed'
This position has also been put by members of the Labor Party. The opposition leader, Anthony Albanese, has claimed the Coalition had increased the jobseeker amount because it admitted $40 a day was not enough to live on.
Albanese stated, 'If it wasn't enough to live on two months ago, when these changes were made, why will it be enough to live on in six months' time?'
Labor MP for Bendigo, Lisa Chesters has similarly stated that the increased rate was recognition from the government that 'the rate was previously too low', and that dropping it back after six months would harm both the long-term unemployed and those recently made unemployed by the COVID-19 crisis.
The chief executive officer of the Australian Council of Social .Service (ACOSS), Cassandra Goldie, has similarly stated, 'Whether people lose work due to coronavirus, bushfires, or simply because there are not enough jobs available at any time, we need a social safety net that works for all, at all times.'
Goldie has further stated, 'It's clear we need a permanent fix to our social safety net. Our income support system was cruel before this crisis began.
We can never go back to the brutality of trying to survive on $40 a day. We need a secure safety net that protects us all from poverty.
We need a decent social security safety net in place that works at all times.'
A continuance of the increased rate of unemployment benefit has also been demanded as necessary by the Australian Unemployed Workers Union (AUWU). The AUWU issued a statement declaring, 'More than a million people are estimated to have become unemployed in March and April, because of public health measures to stop the spread of coronavirus.
On 27th April 2020 the government began paying the "COVID 19 Supplement" to people receiving Jobseeker (previously Newstart) payments, Parenting Payment and Youth Allowance.
This is the first increase of these payments for 26 years.
The government has confirmed that the COVID-19 supplement is temporary and will end in October 2020.
If the Jobseeker payment reduces in 6 months, new claimants and people previously trying to survive on the low rate will be facing a dire situation.'
The AUWU had previously stated, 'Hundreds of thousands of unemployed Australians are needlessly suffering and starving on the punitively low Newstart entitlement. Surviving on less than $40/day, Newstart recipients are struggling to put food on the table and keep a roof over their head -- let alone do all they need to in order to find work...
Newstart is $243 per week below the poverty line (at the time of writing). Thanks to our government's refusal to raise the rate, unemployed Australians are being forced to needlessly endure crushing poverty every single day of their lives...
We must fight for the right of unemployed workers to a liveable income.
We must demand our leaders immediately raise Newstart to the poverty line.'
At only $269 per week, Newstart is $177 per week below the poverty line (at the time of writing). It is less than 41 percent of the minimum wage, less than 18 percent of the average wage, and has not been raised in real terms for 23 years.
Even the Business Council of Australia has advocated to the government that the low rate of Newstart presents a barrier to employment and risks entrenching poverty.
Critics of the former New Start payments note that their inadequacy has been noted by a majority of respondents to a recent poll. Essential polling showed 57 per cent of the 1093 Australians surveyed think JobSeeker should not be cut to its previous amount, while 15 per cent are unsure.
2.The NewStart allowance is even more inadequate for many of those made unemployed by the coronavirus
Critics of the NewStart rates have argued that in the current circumstances this level of payment will be less adequate than it was formerly. Many of those unemployed six months after the introduction of JobSeeker will have previously had well-paid positions before being made unemployed by the economic impact of the pandemic. They will have married, established families, acquired mortgages, and taken out loans in the expectation of continuing to receive a decent wage. With their incomes suddenly gone as a consequence of lockdowns and reduced demand, they will still have the same financial obligations they had prior to the virus.
Labor's industrial relation's spokesman, Tony Burke, has stated, 'Unless you want people to suddenly be able to not pay their bills, unless you want people to suddenly vacate the premises where they live and handing back the keys to homes that they've mortgaged, then the Government is going to have to look at extending this.'
Labor's spokeswoman for families and social services, Linda Burney, has called for Treasury's modelling for the impact of reducing the Jobseeker payment back to $40 per day. She has claimed this is the equivalent of removing almost $1 billion a fortnight from household budgets.
Pat Conaghan, the Nationals MP for Cowper, New South Wales has similarly stressed the particular circumstances of those who have recently lost jobs as a result of the coronavirus and called for them to continue to receive the augmented support beyond the intended six-month term of the new scheme.
Pat Conaghan has stated, 'My priority is to ensure all people during this challenging time who are losing hours of work or losing jobs have support and I would like to see the coronavirus supplement extended for a further six months to do this.
Many people who weren't previously on Newstart and who have lost their job due to the effects of Covid-19 may still struggle to find a job in the six to 12 months after the pandemic, so I would like the coronavirus supplement safety-net extended.'
New South Wales Legal Aid has published on its Internet site advice for families and individuals who suddenly find themselves in severe financial difficulties because of coronavirus-related job loss. The site gives an indication of the types of problem with which people are approaching them and the advice they give. 'If you are in financial hardship and cannot afford to keeping paying off your debts or your mortgage, you should talk to the organisation you owe money to, like a bank, a loan provider, or your energy company. Tell them you are in financial hardship and ask if they can put your repayments on hold or change your repayment plan. If you have lost your job or your hours at work have been cut because of COVID-19, you should explain this.'
The Australian Financial Complaints Authority (AFCA) is offering advice to people in similar circumstances. The AFAC notes that among the consequences of the financial hardship that people are suffering are depression and relationship breakdowns.
As already noted, among the people who have suddenly found themselves unemployed because of the coronavirus are those with substantial rent or mortgage payments and bills that may include private school fees. The head of the New South Wales Parents' Council, Rose Cantali, has stated that most parents had not reckoned with the financial implications of the coronavirus shutdown. Dr Cantali predicted many families would face financial hardship in coming months, as businesses were forced to close and job losses continued.
One private school principal has noted that most parents had paid their term one fees, but some might struggle to pay for term two. Some private schools have established payment plans for families in distress.
The consequences of sudden unemployment are more dire in the United States where there is less income support than in Australia. An article published by CNBC outlines the situation of many apparently financially comfortable Americans struck by the impact of losing their jobs through the coronavirus. One woman noted, 'I have a graduate degree, I've worked at institutions as a professor, I've done everything that I need to do to quote unquote "succeed in the meritocracy" in the U.S. And here I am as a 37-year-old black woman with not enough savings to cover my family's expenses.'
Some advocates of continuing JobSeeker payments point to the distress suffered by people in other parts of the world where such financial support is not available.
3. Newstart was intended as a short-term support for its recipients; however, post the coronavirus Australian unemployment will be entrenched
Australia is currently experiencing a rate of unemployment unknown in the country's recent history and with anticipated unemployment rates equal to those experienced during the Great Depression.
Trading Economics has stated, 'Australia's seasonally adjusted unemployment rate jumped to 6.2 percent in April 2020 from 5.2 percent in March...
It was the highest jobless rate since September 2015, amid business closures and lockdowns due to the coronavirus pandemic. The number of unemployed surged by 104,500 to 823,300. People looking for full-time employment rose by 115,000 to 622,300, while those looking for only part-time work fell by 10,600 to 200,900. Employment tumbled by 594,300, the largest drop on record, to 12,418,700, compared with estimates of a 575,000 fall, as full-time employment dropped by 220,500 to 8,656,900, and part-time employment declined by 373,800 to 3,761,800.
The participation rate fell to an over 15-year low of 63.5 percent. The underemployment rate rose 4.9 points to a record of 13.7 percent, and the underutilization rate increased 5.9 points to an all-time high of 19.9 percent. Monthly hours worked in all jobs fell 163.9 million hours, or 8% to 1,625.8 million hours.'
Predictions regarding the dire state of future Australian unemployment have come from a variety of sources, including former Australian Prime Minister Tony Abbott, who has stated, 'With the tourism, hospitality and entertainment sectors all but shut, education mostly online, retailing much curtailed and everything other than modest local travel at a standstill, economy-wide spending is down at least 20 per cent, GDP is tipped to fall about 10 per cent and unemployment might touch 20 per cent... not only will there be a big hit to the economy, there'll likely be long-lasting change, with some sectors taking years to recover'
Such observations have held those who support the retention of the JobSeeker subsidy to note that Australia's unemployed are likely to be without work for a long time. Politicians and commentators have noted that with the likelihood of entrenched unemployment, benefits will not be a short-term bridging expedient.
Pat Conaghan, the Nationals MP for Cowper in New South Wales, has stated, 'Many people who weren't previously on Newstart and who have lost their job due to the effects of Covid-19 may still struggle to find a job in the six to 12 months after the pandemic, so I would like the coronavirus supplement safety-net extended.'
In a comment published in The Guardian on march 18, 2020, Richard Denniss, chief economist at the Australia Institute noted, 'Leaving aside the fact that the average bout of unemployment in Australia lasts more than 10 months, there is no doubt that over the next six months a wave of newly unemployed people will be queuing up for Newstart. And the more people that enter the ranks of the unemployed, the longer the average bout of unemployment will last.'
Westpac labour market economist, Justin Smirk, has stated, 'We are still going to see unemployment higher at the end of 2021 that it was in early 2020.' It has also been estimated that older workers and low-income people who have the weakest attachment to the labour market will be hard-hit because they are likely to find it hardest to get employment as the economy recovers.
Before the coronavirus one in every four Australians looking for a job was in the long-term unemployed category compared to just one in seven prior to the global financial crisis in 2008. Trend figures show that in February 2020, 176,000 people had been out of work for a year or more, nearly 15,000 more than a year earlier.
Analysts have indicated that Australia's growing long-term unemployment problem will grow worse as a result of the blow to the economy caused by the coronavirus. It is therefore no longer reasonable to view unemployment benefits as a stop-gap supplement, supplied to support people until they return to the workforce. The benefit paid must be sufficient for people to live on.
4. Reverting to the far lower NewStart allowance will not be accepted by a large portion of the electorate
Critics have warned the government that it may not be feasible for them to restore unemployment benefits to what was previously paid under NewStart. According to this line of argument, the large number of people likely to still be receiving unemployment benefits six months after the introduction of JobSeeker is likely to protest on the streets and at the ballot box if the government attempts to halve the subsidy being given.
This point has been made by former Coalition Prime Minister Tony Abbott, who has warned that a narrow pre-occupation with reducing government expenditure will alienate voters. He has stated, 'It's a moral vision of ...cohesive communities that will win the political argument, not a Scrooge-like concern over dollars and cents... It's the strength of our commitment to those communities and to the society they make up that will be the key to political success in the new world ahead.'
Abbott has warned that should the Morrison reduce JobSeeker payments by 50 percent they are likely to encounter vigorous opposition from much of the electorate who may decide to blame the government for the policies that saved their lives but cost them their jobs. Abbott has stated, 'Personal benefits such as the double-dole will be harder [to reduce], especially when recipients will be able to say it was government policy that threw them out of work.'
Between December 2019 and April 2020, the number of people receiving unemployment benefits nearly doubled. On April 30, 2020, a COVID19 enquiry into the economic implications of the pandemic in Australia estimated that by September of this year some 1.7 million people would still be receiving benefits.
It has been suggested that reducing the payments of this number of people will represent a large political challenge and is likely to threaten the government's re-election. It has further been stressed that the effect of the cut in benefit will strike people at a time of maximum vulnerability and therefore be even less acceptable to them. Shane Wright, the Senior Economics Editor for The Age and the Sydney Morning Herald, noted in an opinion piece published on May 11, 2020, 'Based on the Reserve Bank of Australia's jobs forecasts, hundreds of thousands of people will see their unemployment benefits halved just ahead of Christmas. It will also hit many casual and part-time workers whose wages have been artificially lifted by JobKeeper.' When a suggestion was made in early May that the government might reduce the JobSeeker payment in less than six months the proposal met with immediate opposition. The Australian Council of Social Service (ACOSS) chief executive, Cassandra Goldie, claimed that the community would strongly oppose any attempt to make early cuts to income support measures.
A comment by Chris Uhlmann, the political editor for Nine News has noted, 'Nearly half of Australia's pre-coronavirus workforce is now on a government payment: with 5 million people on the JobKeeper allowance and 1.5 million on JobSeeker. Tapering that back to something approaching normal will be the political equivalent of landing a spaceship on a snowflake... Unwinding these lifelines, without pole-axing the goodwill he now enjoys, will be the hardest thing Morrison ever has to do.'
Mungo MacCallum, writing for Echo Net Daily, similarly noted, 'But if [Morrison] is serious about snapping back, he will have to summarily remove much of the bonanza he has only just bestowed on the voters. No more free child care, and back below the poverty line for Newstart recipients. And it won't be just the consumers at the sharp end; industries such as tourism, and private hospitals, will be back on their own. Taking back government benefits is never popular, and it certainly won't be this time.'
Former Liberal Opposition leader, John Hewson, has noted the tenacity with which people hold onto benefits that they have come to see as a right. Hewson stated, 'Does Morrison imagine it will be easy to snap back from having increased the JobSeeker allowance or providing free childcare, or to avoid pressure to convert his JobKeeper payments into a universal living wage?...Howard found out just how tough it could be to take back what was given as a benefit, against the expectation that it had become a right.'
John Hewson concluded, 'Morrison has no alternative but to shift gear into longer-term strategic planning, and to reassess national priorities right across government, industry and civil society.'
5.Continuing to pay the elevated JobSeeker allowance will serve to boost the Australian economy
Supporters of retaining JobSeeker unemployment benefits at their current argue that this will increase expenditure and therefore assist in the recovery of the economy.
The coronavirus pandemic has caused a major economic downturn in Australia. Many of the eternal drivers of the Australian economy, including tourism, foreign investment and trade have been negatively impacted or completely halted by the pandemic. Additionally, major areas of the internally driven economy have been restricted so that employment and consumer confidence have fallen. With the drop in incomes and confidence has come a drop in consumption which has further slowed the economy.
Raja Junankar, Honorary Professor and member of the Industrial Relations Research Centre at the University of New South Wales has noted,' The closing down of many establishments by government decree, the increase in unemployment and the cutting back of hours of work in many industries have resulted in a decrease in household income. Additionally, a substantial loss in consumer and business confidence is expected to cause a fall in investment in real capital goods.'
Professor Junankar has argued that retaining the JobSeeker payment at its current rate will assist the revival of the economy as these payments will be directly spent on food and other consumer goods those contributing immediately to demand and thus supporting Australian businesses and boosting job growth. Professor Junankar has argued, 'Retain the JobSeeker payment (including the coronavirus supplement of $550 per fortnight). This will help to raise the old NewStart allowance to above the poverty level and maintain aggregate demand.'
Danielle Wood, the budget program director at the Grattan Institute has argued that ending JobSeeker and JobKeeper at the end of six months will not only damage the wellbeing of recipients, it will harm those businesses that rely on these people as consumers and slow economic growth further. Wood has stated, 'If the Government moves to withdraw those support measures overnight, there will be a considerable economic shock...
The idea that you can have a drop-dead date and then just pull all that money out of the economy, I think will leave a lot of households exposed, particularly people that have lost their jobs, it will leave a lot of businesses exposed, and it will leave a significant hole in economic activity that could jeopardise the recovery.'
Ms Wood explained further, 'The Government is going to be injecting about $120 billion in support to the economy between July and September - that's about 25 per cent of GDP. All of that is expected to come out by the end of the year under the current timetable - that would leave a very significant hole in the economy and potentially put us back into negative economic territory.'
Australian economist and former OECD director Adrian Blundell-Wignall has similarly argues that the Government has done 'quite a good job at the beginning' of minimising the economic fallout from COVID-19, but that 'all that hard work and public spending could go to waste if the stimulus is withdrawn prematurely.' Referring to when subsidies should end, Blundell-Wignall noted, 'If the timing wasn't right, that clearly would push the economy back into recession.'
JP Morgan's chief Australian economist, Sally Auld, has argued in the same vein, claiming, 'The lifting of restrictions is going to be a very gradual process and that will mean that the economy will only come back very gradually as well.
So, I think that tells you that the risk is that some of these programs may need to extend well beyond September.
In reality, it might be that government agencies need to be a little more flexible in terms of how the economy is drawn off the stimulus, and it might mean than rather than a hard or a sharp end to a lot of these programs, perhaps they taper into 2021.'