Welfare cliff looms large after failed budget

One of the biggest failures of last night’s federal budget was that it failed to permanently lift the rate of JobSeeker from its poverty rate of around $40 per day.

This means that Australia still faces a gaping welfare cliff once the temporary JobSeeker coronavirus supplement is unwound from 31 December, alongside the scheduled abolition of JobKeeper at the end of March, which will push many of those recipients onto JobSeeker.

The JobSeeker supplement was already lowered in late-September from $550 per fortnight to $250 per fortnight. And from 1 January 2021, the supplement is to be removed altogether, thereby returning JobSeeker to its old rate of around $40 a day – well below the poverty line:

According to Deloitte, this reduction in the JobSeeker coronavirus supplement will hammer demand and could cost 145,000 full-time equivalent jobs over two years and reduce GDP growth by $31.3 billion.

The situation is compounded by the scheduled abolition of JobKeeper.

JobKeeper has already been reduced from $1500 per fortnight to $1200 per fortnight for those working more than 20 hours per week, and from $1500 per fortnight to $750 per fortnight for those working less than 20 hours per week.

From 4 January, JobKeeper is scheduled to reduce again to $1,000 per fortnight for those working more than 20 hours per week and to $650 per fortnight for those working less than 20 hours per week.

Then from 28 March, JobKeeper is scheduled to end altogether, thus pushing unemployed recipients onto the $40 a day JobSeeker payment.

Last night’s federal budget ensured that the welfare cliff facing Australia remains, which threatens to punch a massive hole in the economy.

According to the Grattan Institute, income support will fall from $18 billion a month (10.7% of monthly GDP) to $3 billion a month (1.9% of GDP) for the six months beyond:

Moreover, with the deadline for withdrawing superannuation also set for 31 December and mortgage repayment holidays nearing their end, household disposable incomes will be drained even further.

For its part, UBS estimates a similar collapse in emergency support:

The upshot is that by failing to provide adequate income support to Australia’s army of unemployed, as well as failing to boost public building and infrastructure investment, the Australian economy will faces a gaping demand deficit and output gap, meaning the economy will remain weaker for longer.

Treasurer Josh Frydenberg kicked an own goal last night by failing to bolster demand.

Leith van Onselen
Latest posts by Leith van Onselen (see all)


    • Less Woke More BlokeMEMBER

      Let’s see how the Greens’ JK / S cut disallowance motion goes today in the Senate – will Labor put the poor’s money where their (Labor’s) mouths are.

  1. With private sector debt / GDP at a stratospheric 180% and wages stagnant, there is precious little that can done to ‘boost demand’ short of handing out money to all and sundry. This problem isn’t going to fix itself any time soon – and handing out money isn’t a long term solution either.

    I feel sorry for people who can’t see this demands a brutal reset. The party’s over – only the hangover to come.

    • Jumping jack flash

      This, but no reset as such, just more of the same, and twice as much.

      I’m waiting for the “advanced manufacturing” rhetoric to pave the way to increasing the skilled migration targets, with or without a loaded baseline study to prove the absence of “advanced manufacturing” skills in Australia to all the “[email protected]”.

      Well of course we wouldn’t have the required skills. We haven’t manufactured anything “advanced” before. A fine excuse to bring in more debt-free people at the same time as lending standards are reduced, and subsidise their wages with government stimulus.

  2. Jumping jack flash

    “Then from 28 March, JobKeeper is scheduled to end altogether, thus pushing unemployed recipients onto the $40 a day JobSeeker payment.”

    Jobkeeperseeker isn’t going anywhere. Most likely the end date will be pushed back again, and again and again.

    Hopefully, and if they had any inkling about how their false economy actually works, they will reincarnate it as a properly delivered UBI.

    If they want to kill the economy then take it away. They would be mad. The debt isn’t growing fast enough yet. In fact debt growth is completely in the gutter which is saying something when considering the grossly insufficient debt growth over the past 10 years.

  3. The fed broke it. Now, they own it.MEMBER

    My advice to anyone in Australia is save, save, save. Spend nothing. Just like Asia, there is no safety net if you lose your job or get sick and can’t work. Jobseeker is just $400 a week and that will fall to $270 a week in 3 months. Nobody can live on that, unless you have significant savings and a house. That is why Asians save. But by saving hurts the economy so by not guaranteeing a decent unemployment benefit the Government is destroying the economy. No one will have the confidence to spend their tax cuts.

    • Asians save not only because asian countries do not have safety but their workers don’t have many rights. PH was right when she said we’re gonna be asianised..but not so much in warm bodies but in adopting asian policies

  4. Wait until many lib support base on Newstart (JS having ended) and can’t get JM (as too old)