Job seekers need a permanent hike

We are not going back to the jobs reality of late-2019 anytime soon or indeed if ever. Picture: NCA NewsWire / Gary Ramage

Treasurer Josh Frydenberg was dead right to stick with winding back JobKeeper at the end of December and to terminate it completely at the end of March.

He was also right to start winding back JobSeeker – the dole – but in its case it would be wrong to take it all the way back to where it was ‘before the virus’.

There was a legitimate two-way argument whether the old Newstart Allowance was too low. But in the new ‘post-virus’ world we have now all-but permanently entered, taking it all the way back, as currently intended, to the $565 a fortnight would be both punitive and poor policy.

The now-retitled JobSeeker must be reset to a starting base for 2021 at somewhere in the $620-$650 a fortnight range.

First, the main one JobKeeper.

Back in March last year it was not only a ‘no-brainer’ in terms of economic policy, it was fundamentally required by the ‘contract’ between the ‘governed’ and the ‘governors’ that makes our democracy function.

For the first time ever we had a government quite literally ordering the destruction of, or the serious harm to, businesses; also, quite literally ordering people by the hundreds of thousands to lose their jobs.

As I argued, apart from the economic imperative, this imposed a fundamental duty on government to provide something like JobKeeper, to keep workers in touch with their employers rather than being sacked and to help businesses survive.

JobKeeper started out at $1500 a fortnight. At the end of September It was cut to $1200 a fortnight for full-time workers and to $750 for part-timers. At the end of December, those figures came down to $1000/$650.

On both ‘social contract’ and economic policy grounds, the taper made sense, and so does the termination at the end of March – irrespective of the uncertainties about the economic effectiveness of the vaccine discussed yesterday.

The government ordered the economy into recession. It had to provide the support. It then ordered the economy out of recession. The support is no longer needed or justified.

To some extent JobKeeper has been self-cancelling; as businesses get back to work they no longer qualify. But any extension beyond March would be both market-distorting and unfair.

JobKeeper was never intended to be some sort of semi-permanent subsidy to zombie businesses and unsustainable jobs.

It is important to emphasise that while, yes, terminating JobKeeper will help cut the (massive) budget deficit – indeed, lower-than-predicted JobKeeper payments might just bring the 2020-21 deficit under the still-staggering $200 billion figure – termination is far more about boosting the economy.

The same basic arguments apply to both the initial boost to JobSeeker and also to the subsequent tapers.

Back last March, JobSeeker was nearly doubled from NewStart’s $565 a fortnight to $1115. It was cut to $815 a fortnight at the end of September and then to $715 a fortnight at the start of January.

The government plans to cut it all the way back to $565 at the end of March. That would be a bad mistake and quite offensively punitive, GIVEN both the economic reality we will face and the world that government has mandated.

The jobs will simply ‘not be there’ in either the aggregate or in great swathes of the economy like hospitality, retail and tourism - even on the most optimistic assessment (hope) of the vaccine ‘working’.

We are not going back to the jobs reality of late-2019 anytime soon or indeed if ever.

At the same time zero interest rates have delivered spectacular gains to many if not most Australians, But not to job seekers.

Giving then an extra $30-40 a week is the least we can do. It’s also good – and necessary – economic policy.