Australia is in pretty good economic shape, but will the end of JobKeeper change that?
Covid? What Covid? From what I’ve seen the pubs and clubs are bustling, sports stadiums are getting crowds, believers are congregating in their places of worship and woah this light rail to campus is actually kind of crammed.
With the first vaccines being rolled out in Australia last week, life is returning to back to the good old days right?
Well, yes and no. Economic forecasts are certainly looking positive with Deloitte Access Chief Economist Chris Richardson stating “we got this” in response to his outlook on business conditions for 2021.
In the last 7 months, 800,000 jobs have been recovered and the Commonwealth Bank of Australia has estimated that Australian households have now attained an additional $100 billion in savings as a result of all the stimulus measures.
Bye Bye JobKeeper…
JobKeeper is set to end at the end of March, and some tabloids, politicians and analysts are labelling it to be the “fiscal cliff” that is going to induce mass unemployment in our economy.
The amount of jobs still protected by the subsidy is a significant 1.5 million, but considering JobKeeper was subsidising 3 million jobs in October, the trend is heading downwards and will eventually get to a point where the policy is propping up unsustainable businesses.
These so called “zombie businesses” are only surviving as a result of the subsidy and rooting them out is critical to ensuring our economies resources are being allocated to where they can reap the most benefits.
Nevertheless, the end of the subsidy is a frightening idea with RBA Governor Phillip Lowe, conceding that there would most likely be a “blip up” in the unemployment rate for the 1 to 2 months after JobKeeper ceases.
It is timely then that the government this week has announced a $50 per fortnight increase to JobSeeker, the support measure that any workers who cannot be retained post JobKeeper will receive.
The JobKeeper payment will be $307 per week at the start of April, which depending on your perspective is a suitable or outrageously low amount.
Suitable in the sense that, you would think a rate of $43.86 per day would certainly incentivise people to not rely on the dole and be long term unemployed, because as a single source of income that amount is not possible to live on.
Conversely, it is outrageous that thousands of workers who are used to receiving payments ranging from $650 to $1200 per fortnight will have to suddenly adapt to living on $614 per fortnight.
Australia’s unemployment support as a share of individuals previous income when they were in work is the second lowest amidst the OECD nations. If not for the recent increase, Greece, an economy that is basically broke, was supporting their unemployed better than us.
Travel loses its glitz and glamour…
The notion that JobSeeker funds a bunch of slackers is not the case here. These are mainly people in the highly skilled sectors of aviation and tourism, who will have to undergo immense hardship through no fault of their own.
There is a case for a more targeted stimulus policy beyond JobKeeper, and there are a few interesting ideas out there that could revolutionise Australia’s welfare system.
Steven Hamilton from Australian National University and Daniel D’Hotman from University of Oxford have proposed in The Conversation an idea initiated by the Blueprint Institute.
It is called JobMatcher, and the policy is targeted to those who have only recently been moved out of work because at the moment there is no distinguishing support measures between the frictionally unemployed and the long term unemployed.
JobMatcher would pay individuals who have just been made unemployed 70% of their previous salary for 6 months.
Studies show that frontloading support benefits and implementing a hard deadline acts as an effective motivator for individuals to reenter the workforce quickly. However, because these ex-workers are not facing a significant drop in their income, it gives them enough time to find the right job instead of panicking and undertaking a role that doesn’t suit their passions and skills.
This policy idea has already been implemented elsewhere such as Canada, where the initial payment is 62% of average wages, after 9 months, it drops to 23%. In the United States it is 40%, falling back to very little after six months, yet even this is more supportive than Australia’s current system.
Alternatively, the Tourism and Transport forum have proposed an alternate policy measure after finding that 318,000 jobs were at risk. The peak body has suggested a ‘Tourism Employee and Asset Maintenance (TEAM) program’, which involves targeted assistance of between $1,000 to $1,500 per employee per fortnight for eligible businesses that have suffered a 30 per cent to 50 per cent or more downturn in their 2020 turnover. Which essentially is JobKeeper but for one industry, the program’s expected to cost around $7.7 billion.
Yet the current government seems pretty keen to get the budget back on track with Frydenburg stating “the states can do more… they have the balance sheet strength to” support their respective economic recoveries. While Morrison stated “we can’t keep propping the economy up on taxpayers money”.
Regardless there is no doubt action needs to be taken, a recent survey conducted by the aviation union found that 75% of workers believed they will struggle to feed their families once JobKeeper ends. The Australian Services Union assistant national secretary, Emeline Gaske, believes “it’s an absolute catastrophe waiting to happen… people are going to lose their jobs in large numbers”.
A more serious indirect consequence of this is that if these highly skilled workers do move on to other industries, when travel can resume, it may not be a viable industry if these companies lose contact with the staff that ensures flying is a safe and high quality service.
Fortunately, Dan Tehan the tourism minister has announced he is in talks with the industry in regards to potential relief packages beyond JobKeeper. An announcement that was made in January, with nothing really to show for it yet but watch this space.
So to put it simply, yes life sure is back to normal, so long as you don’t take notice of the empty skies and deserted tourist attractions, you have nothing to worry about.