JobSeeker must stay ‘stronger for longer’ to help Australians, report urges

A key support for out-of-work Aussies will be slashed within weeks – but a new report claims it could be a recipe for disaster.

A new economic report has warned against cutting JobSeeker payments too early, claiming the premature withdrawal of support could harm the wider economy.

At the moment, the government’s emergency $1500 a fortnight JobKeeper wage subsidy is due to end in September.

At the same time, JobSeeker payments, which were doubled to $1100 a fortnight to combat the coronavirus crisis, are set to be slashed back down to the previous level of $40 a day.

However, in today’s Deloitte Access Economics Business Outlook report, the firm claims that means “too much support ends at the same time” and that a “smooth transition” was needed.

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The report argues the recession is “changing shape fast”, which means “the nature, timing and dollars of support needs to change fast”.

That includes “new types of spending” on top of recent infrastructure and HomeBuilder packages, and a smarter transition of “timing and dollars”, including phasing support where possible.

“Some type of ongoing wage subsidy – a JobTweaker – will be needed too, limited to a rather smaller range of businesses (such as those tied to international borders). And the dollars per person may need to be lower too,” the report states.

“But wage subsidies gradually become less helpful the longer they’re used as emergency support. There are rising costs in simply keeping zombie jobs alive.

“That doesn’t say pull back overall spending support, but it does say this particular type of support should gradually fade in importance in our defence against the virus.”

Deloitte has warned against cutting both JobKeeper and JobSeeker in September. Picture: NCA NewsWire/Terry Cunningham

Deloitte also argued that “the complexity of exiting from this emergency is high” and that “things keep changing fast”.

“So, over and above existing reasons to have higher unemployment benefits anyway, keeping JobSeeker stronger for longer will be vital in filling the cracks as emergency safety nets morph or disappear. We’re all in this together,” it concluded.

However, it’s not all bad news.

Deloitte also noted Australia’s “relative success” in the fight against COVID-19, and the successful protection of many jobs and businesses – and indicated the recession “may well have already past its worst”.

But despite that positivity, Aussie families are still “struggling with the toxic trio of high debt, high unemployment, and low confidence”, describing 2020 as a “shocker of a year” which means “the ranks of the unemployed will be badly swollen for a while” after the virus took a “sledgehammer to Australia’s economy, with no state or territory left unscathed”.

The release of the report comes just hours ahead of the Reserve Bank’s July meeting, which is expected to result in the official cash rate remaining at the current historic low of 0.25 per cent.

Deloitte predicts it will remain at that level for years to come, and that the economy will contract by 0.4 per cent through 2020-21.

Australia’s coronavirus shutdown cost 835,000 jobs. Picture: William West/AFP

Those predictions come just days after the Australian Taxation Office revealed more than 6500 JobKeeper applications had so far been rejected as ineligible or fraudulent, with thousands of Aussies potentially having their payments cut in cases of deliberately inaccurate claims.