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Jobless queues to grow as support measures are wound back

The $70 billion JobKeeper program, which provides a $1500-a-fortnight wage subsidy to firms who suffer a 30 to 50 per cent fall in turnover, and the coronavirus supplement were both due to end in the last week of September.

JobKeeper will be extended until March 28 next year but at $1200 a fortnight for full-time staff from the end of September. At the start of January it will be cut again to $1000.

People searching for work will get a reduced coronavirus supplement from the end of September, but the government has signalled a boost to the base rate in its October budget.

People searching for work will get a reduced coronavirus supplement from the end of September, but the government has signalled a boost to the base rate in its October budget.Credit:Jason South

Part-time staff working fewer than 20 hours a week will have their subsidy reduced to $750 a fortnight from the end of September and then down to $650 from January.

The government is expecting the number of people supported by JobKeeper to fall from the current level of 3.5 million to 1.4 million at the end of September. By the start of next year, this is tipped to be down to one million.

The coronavirus supplement, which goes to the estimated 1.6 million people on JobSeeker plus hundreds of thousands more on the Parenting Payment, Austudy and Farm Household Allowance, will be cut to $250 a fortnight until the end of the year.

Mr Morrison signalled JobSeeker would be increased from its pre-virus $565 a fortnight level with a decision likely to be announced in the October budget.

Scott Morrison says people would likely move to unemployment benefits from JobKeeper as the wage subsidy was wound back.

Scott Morrison says people would likely move to unemployment benefits from JobKeeper as the wage subsidy was wound back.Credit:Alex Ellinghausen

Taxpayers will foot the bill. JobKeeper, originally forecast to cost $70 billion, is now tipped to reach $86 billion while the coronavirus supplement extension will cost another $3.8 billion.

The Prime Minister said both programs had delivered vital support through the coronavirus recession but they had to be modified as the economy started to recover.

He conceded that as the JobKeeper payment fell there would be people moved off the subsidy and on to JobSeeker as businesses determined their future.

“We will see some people move from JobKeeper to JobSeeker – I expect that,” he said.

“I anticipate, just like businesses already have, they will make judgements about who they’re going to keep on and then who they won’t be able to keep on. But JobSeeker will be there for them.”

Shadow treasurer Jim Chalmers said Labor would likely support the changes, which also include allowing unemployed people to earn up to $300 a fortnight before having their JobSeeker payment reduced, arguing the government had done the right thing by dropping its original proposal to end the scheme in September.

“If the Prime Minister’s instincts were followed through on, that would have been catastrophic for people, for workers, for jobs, for businesses, and for communities right around Australia,” he said.

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The $20 billion cost will add to the budget deficit for this financial year, which economists are tipping will be at least $200 billion. Treasurer Josh Frydenberg on Thursday will deliver an economic update that will include deficit, unemployment and GDP forecasts.

Dr Lowe, giving an address in Sydney, said there were positive signs that businesses heavily affected by virus-related shutdowns were now rehiring staff.

But those sectors that had a pipeline of work before the virus, particularly construction and professional services which between them employ more than 2.2 million people, were now facing a decline in orders.

“As new orders have declined, this pipeline is drying up. If it is not replaced soon, hours worked in these businesses will decline further, just at the same time that other parts of the economy are coming back to life,” he said.

Dr Lowe also used the address to target arguments that government debts could simply be erased by printing money, saying there would always be cost from such an approach, like higher taxes or rampant inflation.

ACTU secretary Sally McManus said while extension of both schemes was a positive step, the government should also fix the “holes” in JobKeeper that excluded workers in places like universities and at foreign government-owned businesses.

Australian Industry Group chief executive Innes Willox said the extension of JobKeeper was a critical commitment as it would give businesses time to prepare for a change in their cash flows when the lower subsidy started.

“The new two-tiered payment based on hours worked by eligible employees is a sensible adoption of the New Zealand wage subsidy approach and will go a long way to sharpening the work incentives that were dampened by the flat rate of JobKeeper in the initial phase,” he said.

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