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Coronavirus: Pandemic pain on pause as welfare net extended

Scott Morrison will roll out more than $20bn in lower JobKeeper and JobSeeker payments to shield the economy and protect businesses.

Prime Minister Scott Morrison, right, and Treasurer Josh Frydenberg. Picture: AFP
Prime Minister Scott Morrison, right, and Treasurer Josh Frydenberg. Picture: AFP

Scott Morrison will roll out more than $20bn in lower JobKeeper and JobSeeker payments to shield the economy and protect businesses through the COVID-19 pandemic, extending the government’s welfare safety net until the end of March.

The move to expand the income support schemes was endorsed by Reserve Bank governor Philip Lowe, who dismissed concerns over rising debt and deficits and described the reduced payments as appropriate measures to boost income.

“For a country that has got used to low budget deficits and low ­levels of public debt, this is quite a change but it is a change that is ­entirely manageable and affordable and it’s the right thing to do in the national interest,” he said.

The unveiling of JobKeeper 2.0 and a new phase of JobSeeker drove a 2.6 per cent surge on the sharemarket, its best day in the past five weeks, delivering a $48bn windfall for investors. The Australian dollar rose 0.5 per cent to US70.53c, on track for its highest daily New York close in 12 months.

Under a new two-tiered system delivering lower payments to JobKeeper recipients from late September, more than two million Australians are expected to move off the wage subsidy scheme by the new year. The six-month extension is expected to cost $16.6bn.

The Prime Minister said he ­expected to see fewer workers on JobKeeper, which has supported 960,000 businesses and 3.5 million employees, as millions of Australians re-enter the workforce.

“When JobKeeper is not necessary, that will be a good day for Australia because that will mean our economy is getting back to a much higher level of performance and businesses are able to support their employees,” he said.

As social and travel restrictions lift, Treasury estimates the number of JobKeeper recipients will progressively fall from 3.5 million to 1.4 million in December and one million by March.

 
 

JobKeeper payments will be cut from $1500 to $1200 a fortnight from September 28 to January 3. Those working fewer than 20 hours a fortnight will have their payments reduced to $750. Between January 4 and March 28, the two payments will lower to $1000 and $650 respectively. “(Australians) know that a current (JobKeeper) scheme that is burning cash, their cash, taxpayers’ cash to the tune of some $11bn a month cannot go on forever. Australians understand that,” Mr Morrison said.

“They also understand JobSeeker at elevated levels cannot go on forever. It has always been our view that it has to taper back.”

Opposition Treasury spokesman Jim Chalmers said Labor was “inclined to support” the government’s JobKeeper plans. “When we see the legislation, if there are improvements that can be made, we will seek to make those improvements, ” he said.

Dr Chalmers said Labor wanted a permanent increase in the JobSeeker payment.

From September 25, JobSeeker recipients will have their payments slashed by $300 to $815.70 a fortnight and have stricter conditions imposed to encourage them to look for work. The reduced rate will be in place until December 31, costing the government an estimated $3.8bn.

Mr Morrison said the government was working on the post-­December phase of JobSeeker, which would be finalised by the end of the year.

 
 

The government has come under pressure from unions and business groups to increase the JobSeeker rate permanently above the $565-a-fortnight in place before the pandemic.

In a major speech on Tuesday, Dr Lowe said the job market had “turned the corner” but warned professional service firms and builders faced significant lay-offs and reduced workflow as their work pipeline “dried up”.

“If it is not replaced soon, hours worked in these businesses will decline further, just at the time other parts of the economy are coming back to life,” Dr Lowe said.

Following a rise in employers reporting difficulties hiring staff, JobSeeker recipients who refuse work from August 4 will have the payment cancelled. They will also have to search for four jobs a month. The government is planning to tighten mutual obligation rules further in September.

Josh Frydenberg, who will deliver a major budget statement on Thursday, said Treasury had predicted the number of JobKeeper recipients would “reduce substantially” as restrictions lifted. “With around 1.4 million people remaining eligible in the December quarter 2020 and one million in the March quarter 2021 … we know that the economic pain caused by COVID will end and that many businesses now struggling will be viable once again,” the Treasurer said. “This is why we’re extending the payment to buy time to get businesses and employees to the other side.”

He warned that the effective unemployment rate was 11.3 per cent, taking into account those who had left the workforce or were on zero hours.

Changes to JobKeeper scheme 'to reduce costs but lift unemployment'

Treasury is forecasting 345,000 new JobSeeker recipients by the end of December, with 245,000 Australians expected to be on both JobSeeker and the lower tier of JobKeeper.

ACTU secretary Sally McManus welcomed the extension but said the two-tiered system of lower payments would lead to stressed businesses laying off workers. She questioned the justification for cutting payments to all workers receiving JobKeeper, suggesting the “misguided” approach would cause financial hardship to the huge number of workers working fewer than 20 hours a week.

Anthony Albanese said it was good the government had “finally woken up (to) some of the wastes in this scheme”.

Qantas chief executive Alan Joyce, who last month announced the airline would cut at least 6000 jobs and keep 15,000 employees stood down without pay, said the six-month JobKeeper extension would ensure its workers remained with the company.

Additional reporting: Patrick Commins

Read related topics:Coronavirus

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Original URL: https://www.theaustralian.com.au/nation/coronavirus-australia-new-1200-fortnightly-jobkeeper-figure-as-pm-extends-wage-support-with-stricter-eligibility-criteria/news-story/06dd4d8e9f8d12516438b021545b0efc