JobKeeper and JobSeeker saved us all, now it’s time to get going
Harvey Norman’s results show JobKeeper and JobSeeker have worked spectacularly well. As taxpayer handouts are wound back, JobSeeker should not be cut to pre-virus rates, writes Terry McCrann.
Terry McCrann
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Gerry Harvey has told us some important — and, generally, ‘good news’ — things, with the extraordinary surge in spending he has revealed across his Harvey Norman network.
First off, JobKeeper especially, but also to some small contributing extent — the doubled — JobSeeker, worked and worked spectacularly.
It worked especially, clearly, for (a more than usually jubilant) Harvey — and also as we shall see in due course for JB Hi-Fi, Good Guys and similar goods retailers.
JobKeeper has been pumping $2.5 billion or so into the hands of some 3.3 million Australians every week since the end of March. They have been spending it.
They have been spending it, where they’ve been allowed to spend it — diverting spending from domestic and most obviously international travel, hotels, restaurants, bars and the like, into shops, whether real or virtual or the ‘click and collect’ between the two.
So yes, less positively, the 30 per cent sales surged revealed by Harvey has to be, has been, countered by massive falls all the way up to 100 per cent compared with a year ago, which have been suffered by so many in the services space.
Consumers now spend much more on services these days than they do in — both real and online — stores; so the sort of spending surge shown by Harvey and to be replicated by his peer group (but not general department stores like Myer and Target) won’t make up for the services plunge.
Overall consumer spending in the September quarter will still be down and down significantly on the September quarter of 2019.
But the Harvey Norman numbers tells us that overall consumer spending will have bounced up from the lows of the crushing recession June quarter.
Indeed, but for Victoria — keeping one quarter of the national economy locked in recession — the bounce-back could have made up almost all the June quarter plunge; all thanks to the $35bn that JobKeeper and JobSeeker put into consumer (mostly virtual) wallets through the quarter.
Of course though — with or without Victoria — it would have still been the same mix of feast and famine.
Those retailers that could operate near-normally like Harvey Norman (apart from in Victoria) would have been feasting, to varying degrees.
Those retailers still under various limitations, even in the ‘opening-up’ states, would still have been starving.
True and importantly, they were being kept half-starved alive by JobKeeper, with that money passing straight through to their employees.
The owners still had to cop all the non-employee costs, with zero or near-zero revenue to pay them.
That’s another all-important metric of what JobKeeper was designed to do and what it has succeeded in doing.
It has kept workers linked to businesses and as a consequences kept the businesses from shuttering permanently.
Now we have reached the point at which the ‘big question’ has to be and is intended to be posed.
As the taxpayer handouts start to be wound back, can consumers sustain their spending — albeit, hopefully, returning to more normal spending patterns away from ‘hard’ retail; and can shuttered businesses spring or at least limp back to life?
The question has to be posed. We cannot continue to live in various tiers of unreality. But it should not be — and is not intended to be — posed ‘cold turkey’.
The Harvey Norman numbers support the staggered winding back of JobKeeper and JobSeeker from the end of the month — but only in the case of JobKeeper to full termination at the end of March.
They do not make the case for any general nationwide extension of the current payments levels; they do not even make that case for Victoria: that state must live with the consequences of its disastrous choice of premier and government.
By the end of March, when JobKeeper disappears completely, employers will have to decide whether to keep their workers or not; employees will have to fund their spending out of wages, salaries and savings. That is appropriate.
What is not appropriate, in my judgment, is the proposed termination of JobSeeker, in full, and at the earlier date of end-December.
JobSeeker goes down from around $550 a week to around $400 a week at the end of September. Both the timing and the size of that drop is appropriate — as it lines up with the reduced JobKeeper to part-timers.
But the remaining special supplement — of $125 a week — disappears in full at the end of December; returning the jobless to the old Newstart payment of around $275 a week.
That is not appropriate. The cut is both too soon and too big. In my opinion it should be cut only to a new permanent level of $340-$350 a week — preferably at end-March.
The old Newstart $275 was already arguably too low even in the pre-virus pre-recession times. It is now beyond dispute that it will be too low for the extremely challenging future that jobseekers are going to face not just through 2021 but beyond.
It will be though particularly damaging — in both economic and human terms — in the period after end-March when JobKeeper goes and employers have to decide to pay their workers or to sack them.
The government seems determined to bring forward the already legislated tax cuts in next month’s budget.
Good. That is entirely appropriate and arguably economically necessary.
But, to make the obvious point, you only pay tax if you have an income.
I do not think it would be a good idea to give tax cuts to those with an income while savagely slicing the JobSeeker payment to those who do not and in large part can’t get one.
Originally published as JobKeeper and JobSeeker saved us all, now it’s time to get going