Lift JobSeeker permanently because it’s fairer: RBA governor

Reserve Bank of Australia governor Philip Lowe wants a permanent rise in the dole, declaring it an issue of fairness while revealing the economy could need record low interest rates until the middle of the decade.

Former prime minister Paul Keating, meanwhile, has criticised the RBA chief for acting too slowly and in effect locking in weak wages growth, while a Liberal Party MP accused Dr Lowe of exceeding his mandate by supporting an increase in the JobSeeker payment.

Governor of the Reserve Bank of Australia, Philip Lowe, says the Jobseeker rate should be lifted permanently.Credit: Dominic Lorrimer

Giving his first address to the National Press Club in Canberra on Wednesday, Dr Lowe said the bank had not examined the economic effects of the planned end to the $150-a-fortnight coronavirus supplement for those on unemployment benefits. Jobseeker is to return to its pre-virus level of $40 a day after March 31.

He said while there might be a small economic boost from extra spending by the unemployed, an increase in the base rate was justified on fairness grounds.

“For me, it’s not a macroeconomic management issue, it is a fairness issue and what is the appropriate level of support we should provide to people who are unemployed,” he said.

JobSeeker is currently worth $565.70 a fortnight.

The Morrison government has been under pressure from social services groups, economists, business organisations and unions to increase the rate permanently once the coronavirus supplement ends.

“As a society, what level of support do we want to provide to people who don’t have a job? And different people legitimately have different views on the level of support stopping, [but] my own view is that some increase is justifiable,” Dr Lowe said.

“I think there is a wide consensus in the community that the previous level should be increased permanently and I’ve said on previous occasions that I would join that consensus.”

The jobs market has improved faster than initially expected at the height of the virus. The RBA’s central scenario is for the unemployment rate to reach 6 per cent by the end of 2021 and to continue falling to about 5.25 per cent by mid-2023.

But Mr Keating criticised Dr Lowe and the RBA for acting “only when it had to, and always late in the piece” causing the downturn to be worse than it might otherwise have been.

He said the bank’s decision this week to double its government bond-buying program to $200 billion showed it had failed to act fast enough, and he accused RBA members of being out of touch with ordinary people.

“Bank staff should spend more time in the poorer suburbs and towns of Australia and less time cloistered in [Sydney’s] Martin Place,” Mr Keating said.

“The people who haven’t been able to find any work or enough hours of work over the last few years and those who haven’t been able to secure a wage rise owing to the bank’s monetary squeeze are not data points on a spreadsheet, they are people the bank has looked past.”

Australian Council of Social Service chief executive Cassandra Goldie said Dr Lowe had joined a large and growing consensus that supported a lift in the JobSeeker base rate.

“The RBA governor made clear this afternoon that he joins the broad consensus for a permanent increase to JobSeeker and that this should be done in the interests of fairness,” she said.

“The government must permanently lift JobSeeker by at least $25 a day so people can cover the basics. It’s impossible to put your best foot forward when you can’t even eat three meals a day.”

But Liberal Party MP Tim Wilson, who is chair of the House economics committee that will quiz Dr Lowe on Friday, said the governor had “exceeded his mandate” by backing a JobSeeker increase.

“The RBA governor’s role is to deal with issues of monetary policy and, of course, broader discussions around macroeconomic policy, not specific issues,” Mr Wilson told ABC TV.

“I think this is one where he probably should have kept his opinion to himself.”

Prime Minister Scott Morrison said on Monday that the government was still considering what to do with Jobseeker, and there was “plenty of time” to make a decision before March 31.

A spokesperson for Social Services Minister Anne Ruston said that by the end of March the coronavirus supplement “will have provided an additional $20 billion in taxpayer-funded support to unemployed Australians”.

“Our priority is to create jobs and more jobs because we know that gaining employment is a real game-changer in anyone’s life.”

During his address, Dr Lowe supported the government’s decision to end the JobKeeper wage subsidy and its infrastructure spending program.

He said the bank would hold the official cash rate, currently at a record low 0.1 per cent, until inflation was “sustainably” between 2 and 3 per cent, which would only occur once unemployment was low enough to drive strong wages growth.

“It is difficult to determine exactly when this condition might be met but ... we do not expect it to be before 2024 and it is possible that it will be later than this,” he said.

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