Jobless welfare surges as small firms shocked

More than 900,000 Australians are relying on jobless welfare support payments, as new research reveals one in three small businesses is reporting financial hardship.

Anthony Albanese and Treasurer Jim Chalmers. Picture: Getty Images

More than 900,000 Australians are relying on jobless welfare support payments, as new research reveals one in three small businesses is reporting severe financial hardship and struggling to pay their power bills.

Amid new Reserve Bank warnings of a 14th rate hike and concerns over inflation and ­labour market outlooks, Department of Social Services data shows the number of JobSeeker and Youth Allowance (Other) recipients has spiked by almost 75,000 since ­hitting post-pandemic lows in September.

For the first time in 12-months, JobSeeker and Youth Allowance recipients at the end of April soared above 900,000 as the unemployment rate rose to 4.1 per cent last month. The largest trend increases are among younger Australians and those on JobSeeker for less than a year.

With Telstra on Tuesday ­announcing it would cut up to 2800 jobs, more mining ­companies mothballing operations and employers reducing hours, the upwards trajectory of Australians relying on welfare support is expected to surge across the year.

RBA board minutes released on Tuesday revealed the central bank had considered the case for a 14th rate hike before ultimately deciding to keep the cash rate on hold at 4.35 per cent.

At its May 7 meeting, held before last week’s budget, board members agreed it was “difficult either to rule in or rule out future changes in the cash rate target” and cautioned that returning ­inflation to the RBA’s 2-3 per cent target band was “unlikely to be smooth”.

Similar to warnings issued by RBA governor Michele Bullock, the minutes said key economic ­indicators were signalling the “risks around inflation had risen somewhat”.

“A higher cash rate might also be required, even with ongoing weakness in aggregate demand, if other factors slowed the pace of disinflation,” the minutes said.

They acknowledged that RBA forecasts released on May 1, which were more pessimistic than Treasury’s assumption that inflation could return to target band by December, did not factor in upcoming federal and state budget measures.

Amid Treasury forecasts that the labour market will continue weakening due to high interest rates and sticky inflation, a new survey to be released in Port ­Adelaide on Wednesday warns that small businesses are under more financial and energy ­hardship strain than during the pandemic.

Research commissioned by Energy Consumers Australia and the Council of Small Business Organisations Australia, involving interviews with more than 400 small business operators, reveals smaller employers are being hammered by high energy bills.

Jim Chalmers’ $3.5bn energy bill relief budget package included a $325 rebate for about one million eligible small businesses whose power consumption does not exceed caps that vary across states and territories.

After criticising the budget for failing to provide more support for 2.5 million small-to-medium businesses, COSBOA chief executive Luke Achterstraat said: “Small business is getting smashed by rising energy costs, with financial strain higher now than during the Covid shutdowns.

“Cost-of-living pressures and other compounding factors like high interest rates are causing huge financial stress to the small business sector. The time for action to help small business is now.”

Mr Achterstraat said that if small businesses – the largest private employers in Australia sustaining roles for 5 million people – were fragile then the job market was “inevitably fragile too”.

The new analysis – focused on small business transition to net zero emissions – found more than one in three small to medium enterprises (SME) had experienced energy hardship in the past 12 months (34 per cent), which was more than under the impact of post-Covid lockdowns.

“SMEs operating within a shopping centre or embedded network are most at risk (62 per cent experiencing energy hardship),” the analysis said.

“Overall 51 per cent of SMEs report a negative financial impact over the last 12 months. Rising energy costs is the number one factor which has ­impacted businesses’ financial situation in the last 12 months (55 per cent impacted by rising energy costs). One in five SMEs (32 per cent) report difficulty ­paying their energy bills on time and in full over the last 12 months.”

As the Albanese government scrambles to fast-track Australia’s trajectory to net zero emissions by 2050, the report says most SMEs have not yet taken any steps towards the energy transition.

“This is higher for micro SMEs with one to four employees (66 per cent),” it says. “The steps most reported to be doing is installing solar panels (21 per cent) and ­implementing energy-efficiency practices (21 per cent). There is limited knowledge about what’s required for businesses to transition to renewable energy, with 36 per cent reporting low knowledge and 52 per cent medium level of knowledge. Only 12 per cent report having high knowledge. There is high interest in resources, advice and support that would help SMEs in the energy transition.”

Mr Achterstraat said small business was the backbone of the economy, “so it’s vital they are given support to deal with energy hardship and the challenges associated with energy transition”.

“With ASIC reporting in February the worst insolvency figures in a decade, many small businesses are enduring a perfect storm of costs and complexity,” he said. “Energy costs are undermining productivity and growth.”