Coronavirus cash spared 2.2 million from poverty

The government’s extraordinary income support measures have virtually eliminated poverty in Australia, according to new ­research.

Pushing poverty levels radically lower wasn’t the intention of the JobKeeper and boosted JobSeeker payments, but it has nonetheless had that effect. Picture: Jerad Williams

The government’s extraordinary income support measures have virtually eliminated poverty in Australia, according to new ­research from the ANU’s Centre for Social Research — which also sets out the devastating societal impact had JobKeeper and JobSeeker not been implemented.

The paper finds that without ­intervention, COVID-19 would have thrown 2.2 million Australians into poverty, lifting the number from 1.6 million before the crisis to 3.8 million — or about 15 per cent of the population.

Alarmingly, the blow from shutting down large parts of the economy without counterbalancing support would have left more than one in 10 middle-class households below the poverty line, which is defined as a weekly disposable income of $416.

The research highlights what little choice the Morrison government had but to spend at an unprecedented scale through the crisis.

“Such results would have led to poverty and housing stress numbers unlikely ever seen in modern times in Australia,” ANU associate professor Ben Phillips said.

The paper, titled COVID-19 JobKeeper and JobSeeker Impacts on Poverty and Housing Stress Under Current and Alternative Economic and Policy Scenarios, was co-authored by Mr Phillips, Matthew Gray and Nicholas Biddle.

It draws on survey work undertaken by the ANU which, uniquely, tracks the same individuals leading into and after the spread of the virus, as well as before and after the receipt of the JobKeeper and JobSeeker payments.

This allowed the authors to model a number of economic scenarios to build a picture of the impact on poverty levels through different economic scenarios and with varying levels of JobKeeper and JobSeeker payments.

Under the current levels of income support, the paper estimates that the number of people in poverty has dropped from 1.6 million pre-COVID to 1.1 million — a reduction of about a third. Moreover, the introduction of the wage subsidy and boosted JobSeeker had “almost eliminated poverty for some of the most disadvantaged groups”, reducing poverty rates for households on Newstart from 67 per cent before the crisis to less than 7 per cent.

“With the initial COVID-19 benefits policy, we’re almost at the point where there’s no poverty for households that usually have extremely high rates (of poverty), such as single parents and Newstart and Youth Allowance recipients,” Mr Phillips said.

“But we wouldn‘t necessarily advocate this policy forever,” he said, noting the likely need to dramatically increase other payments such as the age pension, as well as the damaging tax hikes that would eventually be needed to pay for such massively elevated levels of government spending.

The tapered JobKeeper and JobSeeker payments starting in October — announced by Josh Frydenberg in the July economic and fiscal update — will push 740,000 people back into poverty, bringing the total to 1.8 million, the paper finds.

Single parents were the most likely group to have been in poverty prior to the pandemic, at a fifth of households. Without boosted support, this proportion would have increased to 28 per cent. Instead, the incidence of poverty has been lowered to just shy of 8 per cent, while the lower income support payments later this year will push that proportion back to about 13 per cent.

The less generous payments scheduled for September return poverty rates for those on New­start or Youth Allowance to about 24 per cent.

“We find economic circumstances for households under new payments are far better than they otherwise would be in the absence of payments,” the paper reads.

Mr Phillips said his research revealed the level of unemployment benefits leading into the crisis were too low, in that the ­social security system would not have been able to adequately respond with the huge negative shock and job losses triggered by the pandemic.

“It does show even in normal times the welfare system was not really adequate,” he said. “It’s supposed to be a reasonable buffer through good and bad times. And now we’re in a bad time and it was not nearly enough.”

From the end of September, the fortnightly JobSeeker coronavirus supplement will be reduced from $550 to $250, bringing the overall rate down to around $815 — a level Mr Phillips said should be maintained permanently.