Right: Greens Senator Rachel Siewert is one of many MPs advocating a continuation of the higher Jobseeker payment. Returning to the old Newstart payment, Ms Siewert says, would be 'condemning what is likely to be well over a million of people to live in poverty.'
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The JobSeeker unemployment benefit should revert to the NewStart allowance
1. Retaining the JobSeeker allowance at its current rate is unaffordable
On April 30, 2020, it was announced that 1.3 million people were receiving unemployed benefits across the country, an increase of approximately 450,000 in less than one month. A further 300,000 unemployment benefit claims were still to be processed and department officials acknowledged an anticipated 1.7 million people to be receiving the jobseeker payment by September.
The government has stressed that keeping unemployment benefits at the current level is not financially sustainable. Retaining the current doubling of JobSeeker would cost between $1 billion and $2 billion a month at a 10 per cent unemployment rate.
The Prime Minister, Scott Morrison, has stated, 'We've put a Covid supplement in place for the period of the pandemic and that's what we've budgeted for and that's what our policy is.' Morrison has consistently emphasised the unsustainable cost of the unemployment and job support programs his government has put in place in response to the coronavirus pandemic.
Indicating that there would be a review of the operation of JobKeeper at the end of June, the prime minister stated in relation to JobSeeker and JobKeeper, 'I need to stress again that was a temporary lifeline put in place to help Australians through the worst of this crisis...It comes at a very significant cost.'
At a National Press Club address on May 26, the Prime Minister again emphasised the total cost of the income support and unemployment benefits his government had put in place and stressed that they were unsupportable in the long term. He stated, 'At a now anticipated direct cost of more than $150 billion in just six months, all borrowed, all of it, against future tax revenue. These supports can only be temporary.'
In his May 12 Ministerial Economic Statement, the Treasurer, Josh Frydenberg, similarly outlined not only the benefits his government hoped to derive from the fiscal support measures they had put in place, but also the cost of these measures. 'Over $25 billion of support has already flowed to households and businesses in recent weeks, with more than $30 billion to flow in the next month. This is the largest and fastest injection of economic support the country has ever seen.'
The Treasurer also stressed the cost to the economy now and into the future of the support measures that had been put in place. 'The unprecedented speed and scale of the Government's economic response has driven a rapid increase in borrowings. While there will be a significant increase in Government debt which will take many years to repay, our measures have been designed in a way that protect the structural integrity of the budget.
Australians know there is no money tree. What we borrow today, we must repay in the future.'
In a speech given on May 5, 2020, the Treasurer again stressed the cost of the income supplements and other supports that the government had put in place, clearly indicating that these could not be extended into the future. He stated, 'After the crisis is resolved, Australia will face a higher debt burden that will take many years to repay.'
In a comment published in The Sydney Morning herald on May 18, 2020, Andrew Charlton, founder of AlphaBeta and economic adviser to the Prime Minister during the global financial crisis in 2008-2009. noted, 'Concerns about the affordability of government support programs are understandable. Our national debt has already risen by more than $50 billion in the first two months of the crisis. Rising debt might mean less room for future tax cuts and put further pressure on already stretched public services.'
Some taxpayer groups consider the increased payments to the unemployed untenable and wasteful. An opinion piece published in taxpayer.org.au stated, 'The Coronavirus Supplement doubles Newstart payments for job seekers, changing the payout to $1100 a fortnight from $550. Meanwhile at the end of the fiscal year, out-of-work contractors will need to cough up ten of thousands of dollars in tax to pay for this program. This stimulus package should focus more on helping those impacted by the coronavirus slowdown and less on helping people who already have a source of taxpayer funded income...
Scott Morrison's $320 billion-dollar COVID-19 Stimulus Package is grossly misdirected and a huge waste of taxpayer money. In a time of economic crisis, where workers are losing their livelihoods, and businesses stare into the abyss, the government is spending money on the people, who already have a steady source of income during this downturn.'
2. JobSeeker and JobKeeper are short term expedients not permanent arrangements
Those who oppose the higher JobSeeker payments becoming permanent point out that the coronavirus subsidy which has boosted the payment was never intended to be permanent. It was instituted with a termination date. The same justification has been given for removing JobKeeper payments at the end of six months.
It has been noted that both JobSeeker and JobKeeper will automatically lapse at a predetermined time because, as the treasurer, Josh Frydenberg has stated, 'We actually have sunset clauses on our legislation...We are very conscious that these programs will end when it is appropriate to do so.'
The government has resisted calls to make the increased JobSeeker payments permanent by stressing that they were only ever introduced as a crisis measure. They were always intended as a short term expedient to support those who had lost employment as a result of coronavirus restrictions and to give more disposable income to the unemployed in order to boost demand in an attempt to counter the dampening effects of the coronavirus restrictions.
The treasurer, Josh Frydenberg, has stressed that the increase in JobSeeker was intended solely to accommodate the surge in unemployment created by the government's restrictions in response to the coronavirus. Frydenberg has stated, 'Businesses will close and people will lose their jobs. That is why we have doubled the welfare safety net...Over the next six months the Government is temporarily expanding access to income support payments and establishing a Coronavirus Supplement of $550 per fortnight.'
From this perspective, calls for either subsidy, JobSeeker or JobKeeper, to be extended, let alone made permanent, are unreasonable and inappropriate as each program was deliberately put in place with a temporary purpose and this was made apparent from their inception.
The prime minister has stressed that JobSeeker did not indicate a shift in the government's position on what should be the nature of financial support to the unemployed. Morrison has stated, 'This was not change, in the government's view, about the broader role of the social safety net in Australia.'
In a speech give on May 12, 2020, the treasurer, Josh Frydenberg stated, 'Temporary and targeted, the new spending measures were not designed to go forever but to build a bridge to the recovery phase.'
Explaining why the increased JobSeeker payments were 'temporary and targeted', the treasurer indicated that they were intended to address a particular need and when that need no longer existed they would be removed. The treasurer stated, 'We don't want these payments going out the door for a day longer than they have to.'
In an interview given on May 14, 2020, the prime minister, Scott Morrison, similarly stated, 'There was important design work that was done that accorded with the principles that are set out in early March to ensure that these were temporary measures.'
Morrison went on to explain that the supplement was only ever considered as a short-term expedient, intended to support people only for as long as the pandemic reduced their employment opportunities. The Prime Minister has stated, 'These arrangements with the COVID supplement are temporary arrangements. The reason the COVID supplement was put in place was because we knew that those who would otherwise be on JobSeeker who might in better times be able to go and find employment, that during this period that would be very difficult. So, we understood that. But as the economy reopens and as opportunities open up again, then, of course we would want to see people taking up those opportunities when they present.'
Morrison has repeatedly indicated that both JobSeeker and JobKeeper were intended as immediate stimulus measures designed to address the current crisis, not as permanent payments. He stated, 'We want to keep the engine of our economy running through this crisis. It may run idle for a time, but it must continue to run.'
3. High levels of government debt place an unfair burden on future generations
The Morrison government has repeatedly warned that it will expand the nation's indebtedness in a cautious and responsible manner. It has claimed it will do sufficient to provide support for businesses and individuals currently adversely affected by restrictions caused by the fight against COVID19 but that it will not recklessly expand Australia's debt, leaving a heavy burden for future generations to repay.
In an article published in The Sydney Morning Herald on March 29, 2020, Michael Bachelard noted, 'Perhaps the only certain legacy in Western countries of the COVID-19 will be eye-watering levels of public debt. The Australian government has already committed $63 billion in stimulus spending (and another $135 billion in loan guarantees) with more announcements expected. The longer the crisis goes, the deeper the debt.'
In an article published in The Australian on March 31, 2020, Greg Brown similarly noted, 'The COVID-19 pandemic will force the federal and state governments into their highest levels of debt since the post-World War II years, with expensive stimulus measures and a plunge in tax receipts to push public debt to $1.5 trillion next year.'
Brown added that significant fiscal restrictions might need to be imposed in an effort to begin to peg back the debt. He stated, 'Servicing the debt could also push future governments to consider new and radical options, with a range of suggestions canvassed on Tuesday by experts, including a renegotiation of the GST, an overhaul of the tax and industrial relations systems and diluting of superannuation concessions.'
The Institute of Public Affairs and the Grattan Institute has estimated that commonwealth gross debt could nearly double in the next three years to reach $1 trillion, while UTS Business School economist Warren Hogan doubted any federal treasurer would deliver a budget surplus for a quarter of a century.
Warren Hogan has further stated, 'This is generational, we're looking at 25 to 30 years to get back to surplus.' KPMG chief economist, Brendan Rynne, has similarly noted, 'Restoring the budget to balance would be tomorrow's problem... the likely timeframe is going to be a couple of decades.'
Australian National University's Tax and Transfer Policy Institute head, Professor Robert Breunig, has stated, 'Paying for that debt is going to either mean higher taxes or fewer government services... the tax burden to repay the debt will fall very heavily on the future incomes of young people... young people...are the ones who will be left with the bill.'
One of the government's major concerns has been the extent to which it will be passing on debt to future generations. Scott Morrison has stated, 'It's not just today's taxpayers, it's tomorrow's taxpayers as well. And our Government will always be extremely prudent into not putting burdens on to future generations, let alone the current generation, in dealing with the challenges that we have today.'
The Treasurer, Josh Frydenberg, has similarly stated, 'While there will be a significant increase in government debt which will take many years to repay, our measures have been designed in a way that [protects] the structural integrity of the budget. Australians know there is no money tree. What we borrow today, we must repay in the future.'
It is for this reason that the government has consistently stressed that its subsidies are not intended to be permanent. They are a short-term support which needs to end in order to curtail the extent of government debt. Frydenberg has stated, 'Temporary and targeted, the new spending measures were not designed to go forever but to build a bridge to the recovery phase.'
4. Private enterprise not government is best placed to drive the economy
Those who oppose permanently lifting the rate of unemployment benefits argue that doing so distorts the nature of employment within the Australian economy. Those who hold this view argue that people need to be sustained by a robust economy within which they are gainfully employed. They should not be dependent upon government assistance.
The need for recovery to be driven by private enterprise, not government incentives and support schemes was stressed by the Treasurer, Josh Frydenberg. In his May 12 Ministerial Economic Statement, the Treasurer stated, 'Unleashing the power of dynamic, innovative, and open markets must be central to the recovery, with the private sector leading job creation, not government. We know that a strong economy is the foundation for everything else, and only with a strong economy can you provide the health, education, and essential services that Australians rely on.'
The Prime Minister, Scott Morrison, has similarly stated, 'What our objective is, is to grow the economy and get people back into jobs, and we're making sure that people are being supported by the economy, and not the taxpayer, as quickly as possible...People don't want to be on JobKeeper and JobSeeker. They want to be in a job that's paying them.'
The Prime Minister has further stated, 'We don't want an Australian economy that's propped up by subsidies. We want an Australian economy that's propped up by strong businesses with strong markets and with great products and services that are competitive in a global marketplace.'
In his May 26 address to the National Press Club, the Prime Minister again stressed that job creation was the responsibility of private enterprise. He stated, 'This health and economic crisis has reminded us of just how much we depend on a strong and growing economy for our jobs, for our incomes, for our health and education services, our safety, our security, our social safety net of which we're so proud.
To strengthen and grow our economy, the boats we need to go faster are the hundreds of thousands of small, and medium and large businesses that make up our economy and create the value upon which everything else depends.
Value created by establishing successful products and services, the ability to be able to sell them at a competitive and profitable price and into growing and sustainable markets. It's economics 101.
That's what happens in a sustainable and successful job making market economy.'
Those who support a return to pre-coronavirus unemployment benefits tend to predict a fairly rapid return to economic conditions like those that existed before the pandemic.
The Reserve Bank of Australia has stated, 'Because of the better health outcomes and policy stimulus in place, the rebound in consumer demand and reduced uncertainty about the outlook would allow businesses to rehire workers and resume investment plans quickly...
The hours of existing workers would also increase in response to rising demand, and the unemployment rate would be expected to move from a peak of around 10 per cent to be around its pre-COVID-19 level by mid 2022.'
In his May 12 Ministerial Economic Statement, the Treasurer demonstrated confidence in the capacity of the Australian economy and private enterprise to withstand the current crisis and thus remove the need for government assistance into the future. He stated, 'Consumer confidence has risen for six consecutive weeks and key sectors like mining, agriculture and manufacturing have continued to be resilient and contributed to a record trade surplus of $10.6 billion in the month of March.
Significant product innovation, market diversification strategies and the accelerated uptake of digital transformation opportunities have also been pursued by many businesses in their effort to adapt to the difficult circumstances they are in.'
Referring specifically to a regeneration of employment as COVID19 restrictions were eased, the Treasurer stated, 'Treasury estimates that the benefits of just stage one (health restrictions) being lifted will lead to more than 250,000 people going back to work and more than $3 billion in additional GDP.
This includes 83,000 jobs and $1 billion a month in New South Wales; 64,000 jobs and over $715 million in Victoria; 51,000 jobs and $610 million in Queensland; 25,000 jobs and $435 million in Western Australia; 17,000 jobs and $178 million in South Australia; 5,000 jobs and $50 million in Tasmania; 4,000 jobs and $60 million in the ACT; 3,000 jobs and $40 million in the Northern Territory.'
The Prime Minister, Scott Morrison, has indicated that he sees recovering from the economic impact of coronavirus as requiring economic reform to foster a more efficient private sector that would generate greater employment. In his May 26, 2020, address to the National Press Club, Morrison stated, 'The extent of the damage wrought by Covid-19 on the Australian economy, and the enormity of the challenge we now face to get Australians back into jobs, means the policy priorities for recovery will be different to those in place before this crisis. We now have a shared opportunity to fix systemic problems and to realise gains as a matter of urgency to get more people back into work.
Now, beginning immediately, the Minister for Industrial Relations, the Attorney-General, Christian Porter will lead a new, time-bound, dedicated process bringing employers, industry groups, employee representatives and government to the table to chart a practical reform agenda, a job making agenda, for Australia's industrial relations system.'
5. High unemployment benefits on JobSeeker will discourage a return to full employment
Critics of Jobseeker argue that it is set too high and acts to discourage people from seeking employment.
On May 11, 2020, the Sydney Morning Herald reported that Liberal MPs calling for JobSeeker to end, claimed to have had complaints from employers who have had workers quit because the JobSeeker payment has doubled during the crisis.
The same point has been made by the Prime Minister, Scott Morrison, who has stated, '"It is also important that when you have what are effectively unemployment benefits through JobSeeker at the levels that they are, that can provide in normal circumstances a disincentive, with payments at that level, for people to go and seek work.
It is very important that as the economy starts opening up again, and as we start getting out from under this doona that we're under, that people do go back and start seeking those opportunities.'
The Prime Minister has further stated, 'that's what this plan is about - not to keep people on income support from the taxpayer, but to have a wage that's provided by a business that's successful and earning again and going forward and creating a strong economy.'
The government has been said to be concerned that Australia could face the same problem that the United States has been reported to have, where employers have allegedly had difficulty rehiring workers who have gone on welfare payments.
On May 11, 2020, the Wall Street Journal reported that United States businesses looking to return to normal economic functioning were encountering a problem: workers on unemployment benefits apparently reluctant to give them up. The article suggests that this was complicating plans to end lockdowns and re-open businesses in some states. For some United States workers, unemployment benefits are now paying more than their former jobs did.
On April 20, 2020, Forbes reported Florida Senator Rick Scott who claimed, 'Businesses looking to reopen are telling us their employees don't want to come back to work because they collect more on unemployment...and who can blame them? We cannot be paying people more money on unemployment than they get paid in their job.'
Forbes reported a business owner in Pennsylvania, who similarly stated, 'It's put us in a weird position, because we are asking [employees] to come back to work, but...they have said, "Why should I be paid less than I'm getting at home?"'
It has been claimed that Australia may face problems similar to the United States in attracting people back into employment. The high level of low paid, casual work in Australia means many people are currently better off under JobSeeker than they were in their former jobs.
Tony Makin, economics professor at Griffith University, has warned that the high JobSeeker payments may discourage people from looking for work. Professor Makin has stated. 'This is going to be a challenge for the government because if the (JobSeeker) payment stays at that level, it's going to be a disincentive for some to look for work.' The professor further explained, 'That's on the basis that casuals were earning less and now they're unemployed and earning more.
It's going to be a real challenge to get the JobSeeker payments down because it would be an incentive to switch across and economists say people follow incentives and people are going to do it.'
In Australia, AMP Capital chief economist, Shane Oliver, has stated that in addition to the increased payment given under JobSeeker, the relaxation of regulations requiring recipients to be actively seeking work may also have encouraged people to surrender paid employment and to be reluctant to return to it. Oliver stated, 'The changed rules under JobSeeker enabling people to access it without having to seek paid employment may have encouraged some to temporarily leave the workforce.'
The government appears to be concerned that Australians may become unwilling to look for or remain in employment. The New Daily has reported that the federal government has been urging unemployment consultants to be 'proactive' in pursuing Australians who are unemployed during the pandemic. Job agency consultants have claimed that they have been told to increase pressure on the unemployed to seek jobs. With mutual obligations temporarily suspended, one consultant claimed, 'the push is to put as much pressure on the actual client as possible to try and get them to engage'