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The $560 JobSeeker question. Too much or too little?

It isn’t controversial to say that many households who have sadly ended up out of work are finding it difficult to survive even on the $1100 pay packet and that’s considering extra supports in place during this crisis to defer mortgage repayments, renegotiate rent and pull money out of superannuation.

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For reference, the latest official data found the average Australian household spent $2850 on goods and services a fortnight (more than half of which went to housing, food and transport) in 2016.

Here’s a second question to ask around the table: If you were guaranteed an income, how much would this need to be to get you to quit your job?

Some diligent employees might continue for personal satisfaction and career growth but for many rational workers, who trade their time and expertise for money, if you get enough of a handout it is not worth going to work.

And herein lies a fraught debate playing out across social welfare, political and economic circles in Australia. Just how much should the government give to those on the dole?

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In other words, how much is enough to make ends meet but not so much it discourages people from looking for work?

The answer is not as simple as it appears. Some MPs say the underlying payment, excluding the new supplement, is adequate particularly when considering additional support available such as utility bill help and rent assistance.

Despite this, most commentators, business groups and a growing number of backbenchers agree the payments should be lifted at least temporarily.

Making this situation even more complex is the huge number of people now out of work, with 824,000 losing their jobs in the two months to May on Australian Bureau of Statistics data. This has left many people tapping into Centrelink for the first time in their lives.

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As Nationals MP Damian Drum explains, it’s a “balancing act” to get this one right.

He backs a $5 to $10 a day increase for the dole, but is cautious about over-extending the support in the long term, warning pushing it too high could “take away the incentives for younger people to work”.

Australian Council of Social Services chief executive Cassandra Goldie also wants the figure increased “so that people can cover the basics they need”.

“ACOSS is recommending an income floor that keeps everyone out of poverty and allows people to cover the basics. There must be additional support for people with housing costs, people with disability or illness and people with family caring responsibilities,” Goldie says.

“We’re hearing from many people that they need every cent that they are currently receiving in order to get by. Some people will need more. The current increased rates … must remain until we have an income support system in place that ensures everyone can cover the basics they need,” she says.

Covering the basics on a low income will be a shock to those experiencing their first stint on the dole and the extra supplement is providing a bit of breathing room for those who need to cut back and get a new job.

Unfortunately, finding paid work right now is much easier said than done. Job vacancy data from the ABS shows a 43 per cent collapse in available roles over the three months to May, the worst fall on record.

So while it makes sense in theory to keep the unemployment benefit tight to motivate people to get a job, in practice this advice falls flat when there is so little work available.

Deloitte Access Economics partner Chris Richardson suspects the economy will get back to where it was before the virus by mid-2021, but predicts the unemployment rate will take another three years after that to recover.

“Given the recession is changing shape very fast, given how volatile it is, the level [of JobSeeker] should be increased. JobSeeker is the last line of defence for the Australian economy and it should be the last thing to be weakened,” he says.

Finding the right level between making ends meet for those without work and not providing so much it is an unnecessarily large drain on the already-strained federal budget is another difficult financial balancing act.

One option getting traction is another short-term supplement boost to JobSeeker, but it’s pretty easy for costs to escalate rapidly when you tinker with payments made to the 1.5 million people expected to be left jobless into 2021.

As revealed in The Sydney Morning Herald and The Age, an extra $200 a fortnight to replace the current $550 supplement as modelled by Bankwest Curtin Economics Centre, would cost almost $3.8 billion over six months. That’s on top of $11.7 billion already provided in support.

The Centre’s director Alan Duncan describes this as “relatively inexpensive” and a worthwhile use of government funds to help alleviate some of the financial pain of those struggling through the pandemic. It’s unlikely many workers who have lost income, or are feeling insecure in their jobs, would disagree.

But with JobSeeker’s future after September yet to be finalised, the only certainty is everyone will soon find out exactly how far government and household purse strings can stretch.

Ross Gittins is on leave.

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