Daniel Andrews plans pilot for casual workers’ sick pay but Morrison government critical



Lukas Coch/AAP

Michelle Grattan, University of Canberra

The Victorian government plans a pilot scheme for up to five days sick and carer’s pay, at the national minimum wage, for casuals or insecure workers in priority industries.

Even though the initiative is at a very early stage, with $5 million in Tuesday’s state budget for consultation on the pilot’s design, the federal government immediately attacked the move.

Industrial Relations Minister Christian Porter said it “raises a number of major issues”.

Once underway, the pilot would run two years in selected sectors with high casualisation. It could include cleaners, hospitality staff, security guards, supermarket workers and aged care workers.

“The pilot will roll out in two phases over two years with the occupations eligible for each phase to be finalised after a consultation process that will include workers, industry and unions,” a statement from Premier Daniel Andrews’ office said.

Casual and insecure workers in eligible sectors would be invited to pre-register for the scheme.

While the pilot would be government-funded, any future full scheme would involve a levy on business.

Andrews said: “When people have nothing to fall back on, they make a choice between the safety of their workmates and feeding their family.

“This isn’t going to solve the problem of insecure work overnight but someone has to put their hand up and say we’re going to take this out of the too hard basket and do something about it.”

But Porter said a fully-running scheme would put “a massive tax on Victorian businesses”, which would be paying both the extra loading casuals receive and the levy.

“After Victorian businesses have been through their hardest year in the last century, why on earth would you be starting a policy that promises to finish with another big tax on business at precisely the time they can least afford any more economic hits?”

Porter said it would be better to strengthen the ability of workers to choose to move from casual to permanent full or part-time employment if they wished.

He said this was what had been discussed in the recent federally-run industrial relations working group process involving government and employee and employer representatives.

“It must surely be a better approach to let people have greater choice between casual and permanent employment than forcing businesses to pay a tax so that someone can be both a casual employee and get more wages as compensation for not getting sick leave – but then also tax the business to pay for getting sick leave as well.”

Porter claimed the Victorian approach would be “a business and employment-killing” one.

In the pandemic the federal government has made available a special payment for workers who test COVID-positive or are forced to isolate and don’t have access to paid leave. The Victorian government has provided a payment for those waiting for the result of a COVID test.

The Morrison government will introduce an omnibus industrial relations reform bill before the end of the parliamentary ar, following its consultation process.

A central objective will be to streamline enterprise bargaining. Scott Morrison told the Business Council of Australia last week: “Agreement making is becoming bogged down in detailed, overly prescriptive procedural requirements that make the process just too difficult to undertake”.

He said various issues needed addressing. “The test for approval of agreements should focus on substance rather than technicalities. Agreements should be assessed on actual foreseeable circumstances, not far fetched hypotheticals.” Assessments by the Fair Work Commission should happen within set time frames where there was agreement from the parties.

Morrison said key protections such as the better off overall test would continue but “our goal is to ensure it will be applied in a practical and sensible way so that the approval process does not discourage bargaining, which is what is happening now”.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Meet the Liveable Income Guarantee: a budget-ready proposal that would prevent unemployment benefits falling off a cliff



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John Quiggin, The University of Queensland; Elise Klein, Australian National University, and Troy Henderson, University of Sydney

The economic crises that have punctuated the 21st century, most notably the global financial crisis and the COVID-19 crisis, have led to a growing realisation that alternatives to our present system are possible and perhaps inevitable.

In particular, there has been an erosion of the belief that the economy is able to provide a decent income to everyone who wants to work.

A number of proposals have been put forward in the wake of this realisation, among them

  • universal basic income, which would unconditionally provide every resident (children and adults) with a regular subsistence wage

  • a job guarantee in which the government would provide real jobs, at the minimum wage, to all unemployed Australians

Many seem utopian, which isn’t necessarily a bad thing – it’s good to look beyond the day-to-day to consider how things could be done differently.

In a new Australian National University Policy Brief we propose something practical, which we are calling a Liveable Income Guarantee (LIG).

Take the age pension..

It starts with one of the most successful institutions we’ve got: the age pension.

Before the age pension was introduced in 1908, retired Australians were highly likely to be poor. But now, on some measures, retired Australians are less likely to be in poverty than Australians of less than pension age.

Our proposal is to replicate this success for the entire population.

We are proposing a payment equal to the pension, and subject to the same asset and income tests, that would be provided to everyone who is willing to make a contribution to society consistent with their ability to do so.

…extend it to others

“Contribution” would be defined broadly to maximise contributions. Examples would include full-time study, volunteering, caring for children, ecological care, and starting a small business.

The biggest shift relates to the treatment of unemployed workers and single parents.

JobSeeker is set to return to the unliveable rates of the former Newstart after the end of December.

We are suggesting that instead it be lifted to the rate of the age pension, which is about where it used to be before unemployment benefits were frozen in real terms in the 1990s.


Newstart versus the age pension

Dollars per fortnight, single.
Source: Ben Phillips ANU, DSS

Parenting Payments have also been notoriously low, especially for single parents, whose support has been cut consecutively by five prime ministers from Howard to Turnbull.

Unlike some proposals for a universal payment to all citizens, the increased expenditure required for the liveable income guarantee would be relatively modest, as little as A$20 billion a year.

Do it for the price of tax cuts…

This is roughly comparable to the budget cost of the income tax cuts, primarily directed to high earners, legislated to take effect in 2022 and 2024.

The real barriers to the adoption of the proposal are ideological. The central assumption underlying economic policy in Australia has been that in a market economy everyone who wants a decent job is capable getting one.

It has followed that the unemployed are seen as either unwilling to work or suffering from particular deficits that need to be remedied by training and job readiness programs case by case.




Read more:
‘If JobSeeker was cut, the unemployed would be picking fruit’? Why that’s not true


Over the first two decades of this century, it has become evident this assumption is incorrect. The global financial crisis and the subsequent swing to austerity produced sustained high unemployment in much of the developed world.

While Australia avoided the worst consequences thanks to well-timed stimulus (here and in China) the unemployment rate has failed to fall below 5% as underemployment has climbed for more than a decade.

Any prospect of a rapid return to full employment have been dashed by the pandemic.




Read more:
The jobs market is nowhere near as good as you’ve heard, and it’s changing us


Longer term it is clear that many existing jobs will disappear as a result of technological change, and it isn’t clear that our current institutions will be able to manage the process.

While governments should commit to a return to full employment, they are unlikely to be completely successful.

Ready us for the future

The implementation of a liveable income guarantee would allow us to be better prepared in case they are not and to be better prepared for future disruptions, be they pandemics or anything else.

On the brighter side, technological progress has increased our productive capacity to the point where we can afford to support a much wider range of non-market contributions to a market economy. The crisis has shown us how important many of those contributions are.

Looking beyond the crisis, it is possible (relatively simple) to create a society in which everyone has a decent standard of living, and no one is excluded.

Providing dignity to everyone who makes a contribution would benefit us all.The Conversation

John Quiggin, Professor, School of Economics, The University of Queensland; Elise Klein, Senior Lecturer, Australian National University, and Troy Henderson, Lecturer in Political Economy, University of Sydney, University of Sydney

This article is republished from The Conversation under a Creative Commons license. Read the original article.

‘If JobSeeker was cut, the unemployed would be picking fruit’? Why that’s not true



F Armstrong Photography/Shutterstock

Peter Davidson, UNSW

I’m not sure which does the most harm: the cut of A$150 per week in JobSeeker payments due this Friday or the sudden and coincidental volley of media reports about unemployed people refusing jobs, including fruit picking.

This narrative is jarring when there are 19 people unemployed or underemployed for every vacancy and only 3% of employers report that they are recruiting but can’t find enough applicants.

Are unemployment payments really that cosy since they almost doubled in April from $282.85 to $557.85 a week?

$557.85 a week for a single adult is around 80% of the full-time minimum after-tax wage of $669 per week, and a good less again as a proportion of what most entry level jobs pay, because most pay more than the minimum wage.

Five studies conducted in the United States where unemployment payments were lifted US$600 per week during the coronavirus crisis found no evidence they were discouraging people from finding jobs.

Some were making 70% more than they did while in jobs.

Unemployed workers would generally prefer to be in paid work, and in any event are usually required to search for it.

There are other reasons not to pick fruit…

Fruit pickers are often underpaid cash-in-hand.

Growers representatives have told a parliamentary inquiry that when JobSeeker payments were doubled, many workers collected their final cheques and went home.

But temporary migrants and young locals are often underpaid in such jobs.

Squeezed by powerful customers, employers with thin margins and a ready supply of labour have grown used to offering very low wages cash-in-hand.

In piece-work like picking where pay is tied to output, there’s no legal requirement to pay minimum wages.

A labour hire firm recently complained people weren’t taking up their offer of “at least $500 per week” to pick strawberries.

$500 is two-thirds of the minimum wage.

It’s not just the pay that discourages people from taking up crop picking: they need to be fit and able to travel for what’s often a short period of paid work.

This won’t work for many people on Jobseeker, including the quarter with disabilities, the third aged 45 or over, and the 10% caring for children.




Read more:
Unemployment support will be slashed by $300 this week. This won’t help people find work


There are ways to reduce under-payment and high turnover in such jobs.

Reducing our reliance on temporary migrants would be a first step.

Otherwise, employers won’t compete fairly to attract workers, and local workers will remain wary.

More direct contact between the employers and unemployed people and less reliance on labour hire firms would help build trust.

…and other reasons not to work more days

Jobseeker tops up the wages of many part-time workers.

It is cut by 50c for every dollar earned above $53 per week, then 60c for every extra dollar earned up to $128 per week, before cutting out completely for a single adult on $544 per week.

Former social security official David Plunkett calculates that before COVID and the effective doubling of JobSeeker, a worker on it gained a net $100 to $200 for working one to three days a week at the minimum wage, climbing to $269 for the fourth day, after which Jobseeker expired.

Since the new arrangements and top up that effectively doubled JobSeeker, the net gains have fallen slightly $100 to $175 for the first three days, before dropping to just $5 on the fourth.




Read more:
The compromise that might just boost the JobSeeker unemployment benefit


The problem isn’t the effective doubling of JobSeeker, it’s the sudden-death cut off of the top-up as soon as the last dollar of Jobseeker expires.

That flaw could be fixed by tapering the supplement out gradually (rather than increasing the “income free area” to $150 per week as the government is proposing).

There’s no need to force people to choose between poverty and entry-level jobs.

Even if, for example, Jobseeker was increased permanently to the pension rate, it would still be under 70% of the minimum wage after tax.

Incentives for part-time work can be fixed by reforming income tests and tax. Beyond that, the answer to periodic labour shortages, exploitation and high turnover in entry-level jobs is better entry-level jobs.The Conversation

Peter Davidson, Adjunct Senior Lecturer, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Keating is right. The Reserve Bank should do more. It needs to aim for more inflation



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Chris Edmond, University of Melbourne and Bruce Preston, University of Melbourne

Former prime minister Paul Keating isn’t alone in wanting the Reserve Bank to do much more to ensure economic recovery.

In an opinion piece for major newspapers he has said it ought to be directly funding government spending rather than indirectly by buying government bonds from third parties.

But we think there’s something else the Reserve Bank can do.

Governor Philip Lowe is right to call on governments to spend more, creating “fiscal stimulus”.

But we don’t think that absolves the Reserve Bank of the need to provide more “monetary stimulus”.

Simply put, the Reserve Bank needs to create more inflation. Quite a lot more.

For years now, the bank has chronically undershot its inflation target of 2% to 3% per year. This has to stop.


Consumer price inflation since the Reserve Bank’s 2-3% target


ABS Consumer Price Index, Australia

Inflation plays a vital role in government finances, through its influence on nominal income growth. Higher nominal income growth lowers outstanding debt as a fraction of income.

To appreciate the size of the effect, if average inflation runs at 1.5% per year rather than 2.5% per year (the bank’s central target), after a decade prices will be roughly 10% lower.




Read more:
No big bounce: 2020-21 economic survey points to a weak recovery getting weaker, amid declining living standards


As a consequence, public debt as a fraction of national income will be 10% higher, and that’s before taking into account the revenue implications of lower inflation.

Too much inflation creates its own problems, but so does too little.

Of course, the Reserve Bank’s options are limited right now. Short term interest rates are effectively zero and can’t go much lower without turning negative, an idea the bank has so far resisted.

The bank needs to commit to “too much” inflation

But there are things the bank can do, and they involve making clear its plans for when inflation recovers.

When economic growth revives, be it in 12 or 24 months, the bank will face a choice between raising rates to more normal levels, or continuing to keep them extraordinarily low.

The RBA should do the latter and promise serious inflation, more than it is comfortable with, for some time to come.




Read more:
Price-level targeting: how inflation-focused central banks can squeeze more from interest rates


Promising to overshoot its target band will raise inflation expectations and then inflation itself, lowering the real interest rate.

This will buttress the recovery, supporting economic growth. It will also greatly improve the state of government finances.

How much inflation should the RBA generate?

It should aim for average inflation of 2-3% over a long window, at least ten years.

This will place a clear upper bound on how much inflation is appropriate over the long term, while requiring substantial inflation for some time to make up for the sustained undershooting of its target.

It’s being tried in the United States

Such a policy might sound unusual. And there would be protests about credibility and the risks of changing institutional arrangements during a crisis.

But the United States Federal Reserve recently adopted such a policy after an extensive review.

There’s no reason Australia’s Reserve Bank couldn’t do the same.

As it happens, hardly any formal change is required. Its Statement on the Conduct of Monetary Policy says its goal is 2 to 3% inflation “on average, over time.”

So there’s no need to change the wording, merely the interpretation.

It could make clear that a practical change had taken place by referring to the new regime as a “price-level target”, since targeting inflation over a long time is equivalent to targeting a path for the overall level of prices.

It’d hold the bank to account

Regardless of the label, such a clearly enunciated approach would make monetary policy more effective and help the government with its finances.

And that’s not all. An average inflation target would provide a clearer benchmark against which to assess the bank’s performance and thus strengthen the accountability of one of our most important institutions.

Too often in the past the bank has excused its failure to hit its inflation target by appeals to a vague and shifting list of factors outside of its control.




Read more:
Vital Signs. Yet another year of steady rates. What’s the point of the RBA inflation target?


While some excuses may have merit, the existing regime does not well communicate how such undershooting determines what the bank will do in the future.

By contrast, an average inflation target would clearly communicate that whatever the excuses for undershooting, future policy will be set to overshoot until average inflation is back on target.

It’s appropriate for fiscal policy to take the lead right now. But monetary policy has to be ready to do its job too.The Conversation

Chris Edmond, Professor of Economics, University of Melbourne and Bruce Preston, Professor of Economics, University of Melbourne

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Reserve Bank ‘dallies with indolence’ instead of helping government pursue full employment: Paul Keating


Michelle Grattan, University of Canberra

Former prime minister Paul Keating has launched an extraordinary attack on the Reserve Bank, accusing it of having “one of its dalliances with indolence”, and describing it as “the Reverse Bank”.

Keating, who was treasurer in the Hawke government and once boasted of having the Reserve Bank in his pocket, said the bank’s job was “to help the government meet the task of full employment” and it was failing in this.

He criticised its officials for being “the high priests” of incrementalism, rather than doing what the situation called for.

His outburst, in a statement issued on Wednesday, followed a speech this week by the bank’s deputy governor Guy Debelle who canvassed the pros and cons of options for further monetary policy action if the bank’s board decided it was needed.

These included buying bonds further out along the curve, foreign exchange intervention, lowering rates without going into negative territory, and moving to negative rates.

Keating labelled Debelle’s contribution “meandering thoughts”.

“Knowing full well that monetary policy can now no longer add to nominal demand – something that now, only fiscal policy is capable of doing, the Reserve Bank is way behind the curve in supporting the government in its budgetary funding measures,” Keating said.

“For a moment, it showed some unlikely form in pursuing its 0.25% bond yield target for three year Treasury bonds and a low interest facility for banks.

“But now, after 600,000 superannuation accounts were cleared and closed down, with 500,000 of those belonging to people under 35 – a withdrawal of $35 billion in personal savings, and further demands arising from the employment hiatus in Victoria, [Debelle] yesterday strolled out with debating points about what further RBA action might be contemplated.”

Keating said that in his office when he was treasurer, the bank was nicknamed “the Reverse Bank”, because it was too slow raising rates in the late 1980s and too slow lowering them in the early 1990s – which gave Australia “a recession deeper than it would have otherwise had”.

As treasurer he’d “worn the cost of the bank’s indolence in the task of smashing inflation”. And as a measure of his giving the bank more discretion, as prime minister he’d worn the “great political cost” of the bank’s rate rises in 1994.

“As history has shown, when a real crisis is upon us the RBA is invariably late to the party. And so it is again,” Keating said.

The bank’s act had two objectives – price stability (not a problem at the moment) and full employment, Keating said.

“The Act says the Bank and the government should endeavour to agree on policies which meet that objective – in this case, employment.”

The bank “should be explicitly supporting the government so the country does not experience a massive fall in employment”, hitting particularly younger workers.

But instead of that, Debelle “conducts a guessing competition on what incremental step the Bank might take to help,” Keating said.

“These are the high priests of the incremental. Making absolutely certain that not a bank toe will be put across the line of central bank orthodoxy.

“Certainly not buying bonds directly from the Treasury – wash your mouth out on that one – what would they say about us at the annual BIS meeting in Basel?

“Not even ambitiously buying sufficient bonds in the secondary market, like the European Central Bank or the Bank of Japan.”

He said the bank should “shoulder the load. And in a super-low inflationary world, that load is funding fiscal policy. Mountainous sums of it.

“In an economic emergency of the current dimension that means putting the orthodoxy into perspective and doing what is sensibly required.”

Like other central banks, the Reserve Bank “has become a sort of deity, where lesser mortals might inquire, however respectfully, what the exalted priests might be thinking or have in mind for their prosperity or the country at large,” Keating said.

“The Governor and his deputies do not wear clerical collars and black suits. But that is the only difference in their comport and attitude.”The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Mapping COVID-19 spread in Melbourne shows link to job types and ability to stay home



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Melanie Davern, RMIT University; Mary-Louise McLaws, UNSW, and Ori Gudes, UNSW

COVID-19 provides a stark reminder of inequity and the spread of disease. These aren’t new ideas and can be traced back to John Snow’s cholera maps and Charles Booth and his colour-coded maps of occupation types and poverty in the 19th century. Today, as case numbers soar in Melbourne, large clusters of COVID-19 cases have been identified across the northern and western suburbs, raising questions about occupation types and socio-economic differences across the city.

One of the most important messages from government during the pandemic has been to work from home if you can. Though what happens if your work isn’t suited to this?




Read more:
Two weeks into Melbourne’s lockdown, why aren’t COVID-19 case numbers going down?


Snow and Booth were forefathers of modern geographical information systems (GIS) analysis. It’s a powerful tool for mapping and visualising differences or inequities across cities and the spread of disease. We mapped the connection between occupation types, indicating the ability to work from home, and the locations of COVID-19 cases across Melbourne in the recent second wave.

Why is equity a health issue?

Hotspot suburbs were first identified and ring-fenced in early July. A hard lockdown was applied to the 3,000 residents of nine high-density public housing estates in inner Melbourne.

Ring fencing is a powerful method of containing a disease. It’s most appropriate where a specific location has a distinctive pattern of risk. It should also be applied without bias.

As the public housing towers lockdown reminded us, there is an inequity in health.




Read more:
Our lives matter – Melbourne public housing residents talk about why COVID-19 hits them hard


Many people associate equality with treating everyone the same regardless of their needs. This is very different to equity, which is about treating people according to their needs. Unlike equality, equity is providing people with extra help when it is needed.

The picture below makes the concept of equity easier to understand.

Illustration of equity by showing how standing on crates enables children of different heights to look over the people in front of them and see the action on a sports field.

Craig Froehle/Medium, CC BY

In the context of this pandemic, a recent discussion of housing affordability raised the issue of equality versus equity.




Read more:
Overcrowding and affordability stress: Melbourne’s COVID-19 hotspots are also housing crisis hotspots


We see a stark difference between the initial transmission of COVID-19 and the second wave. The earliest cases were concentrated in Melbourne’s wealthier areas and associated with international travel. In the second wave we have seen a different pattern of spread across disadvantaged areas of Melbourne.

This pattern is possibly linked to inequity associated with living and work conditions. People with higher education tend to work in occupations that often enable them to work from home, making it easier to self-isolate.

Outer areas of Melbourne have had more cases of COVID-19 cases in the second wave and this might be associated with job types and education levels. Residents living in inner areas of Melbourne are more likely to hold tertiary qualifications needed for occupations more suited to working from home.

What does mapping reveal?

We analysed Australian Bureau of Statistics Census data on employment types from the Australian and New Zealand Standard Classification of Occupations. We identified 93 major occupation types suitable for working from home.

We linked and mapped these occupation data along with COVID-19 incidence according to local government areas. The map below shows data from July 16.

Map of incidence of COVID-19 cases across Melbourne and proportion of people in occupations able to work from home by local government area.

Data: DHHS, July 16, Author provided
Legend for map: size of red dots shows number of COVID-19 cases, darker areas indicate more people in occupations able to work from home.

The map reveals lower proportions (shown by lighter-coloured areas) of people employed in occupations suitable for working from home in many outer northern and western areas of Melbourne. In particular, the proportion is low in Hume, one of the local government areas where COVID-19 cases have been concentrated.

In the inner and outer eastern areas of Melbourne, residents are more likely to be able to work from home. Nillumbik in the outer north-east has the highest proportion of people able to work remotely. It has very few cases of COVID-19.

Greater Dandenong is an exception to this pattern. As a manufacturing hub for Melbourne, it has a low proportion of people in occupations suitable from working from home, but has few cases.

COVID-19 is spread through community transmission or close contact with others who are infected, as happened in meatworks factory clusters in northern and western Melbourne. Greater Dandenong may have been protected by the small number of cases across south-eastern Melbourne where more residents have occupations suitable for working from home.

The Victorian Department of Health and Human Services updates COVID-19 incidence data hourly. We first sourced data on July 16, a week after the Melbourne-wide lockdown began, to understand the patterns of occupation types and COVID-19 clusters as they evolved. To continue monitoring, we have developed a data dashboard, which is shown below.

Data dashboard showing incidence of COVID-19 cases by local government areas

Ori Gudes, Author provided

We hope this data dashboard will be released in coming days with updated data.

Using inclusive data to protect everyone

The related patterns of occupations and COVID-19 incidence remind us of the importance of the well-known relationships between health and place.




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Your local train station can predict health and death


This pandemic takes advantage of inequity and our most vulnerable communities. It shows us why we must include the full spectrum of society (not only those we know best) when we make decisions, communicate and ask people to work from home.

Many workers are engaged in casual and insecure employment and work is a critical determinant of health. Our mapping provides evidence that can help authorities decide where and how to focus preventive measures when planning public health interventions.

These methods of GIS analysis and easily understood maps should be freely available. The community will then be able to interrogate the data so they can realise in close to real time the rationale for public health directives.

These same principles have been used to understand health and liveability in cities though the Australian Urban Observatory to inform city planning.


We thank Weijia Liu of UNSW for assisting with data collection in this study.The Conversation

Melanie Davern, Senior Research Fellow, Director Australian Urban Observatory, Co-Director Healthy Liveable Cities Group, Centre for Urban Research, RMIT University; Mary-Louise McLaws, Professor of Epidemiology Healthcare Infection and Infectious Diseases Control, UNSW, and Ori Gudes, Senior Research Fellow, Geospatial Health Lab, University of Canberra, and Adjunct Senior Lecturer, School of Public Health and Community Medicine, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Cutting unemployment will require an extra $70 to $90 billion in stimulus. Here’s why



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Brendan Coates, Grattan Institute; Matthew Cowgill, Grattan Institute, and Tony Chen, Grattan Institute

After managing the first stage of the COVID-19 crisis so effectively, the government now faces a bigger challenge: getting us back to work.

The official employment figures indicate the scale of what’s needed. In the past two months number of Australians with a job has fallen by 835,000. Millions more are in jobs kept on life support by JobKeeper.

Employed Australians, total

Includes Australians regarded as still employed because they are on JobKeeper.
ABS 6202.0

The Reserve Bank’s latest public forecast has the unemployment rate peaking at 10% and then falling to 6.5% (baseline scenario) or 5% (optimistic scenario) by mid-2022.

In Grattan Institute’s latest report, The Recovery Book, released this morning, we argue this isn’t ambitious enough.

The case for ambition

The bank and the government ought to aim for something better, closer to 4.5%.

This is the rate it has previously identified as “full employment”, the lowest Australia can sustainably achieve without stoking inflation.

It would mean bringing unemployment down 1.5 percentage points further than it might otherwise fall over the next two years – to somewhere between 4% and 5%.

Projected unemployment with and without extra fiscal stimulus

RBA forecasts linearly interpolated between 6-month intervals. ‘Full employment’ corresponds to the RBA’s pre-COVID estimate, plus and minus one standard error band.
Grattan calculations, RBA May 2020 Statement on Monetary Policy; Lucy Ellis, 2019 Freebairn Lecture in Public Policy

The bank has passed the baton

With the bank’s cash rate already cut to 0.25%, conventional monetary policy (cutting the cash rate) has run out of steam.

Unconventional policy will help.

The Reserve Bank is advancing cheap money to private banks for onlending to businesses, buying government bonds to keep the three year bond rate near 0.25%, and has pledged to keep the cash rate at 0.25% for the next three years.

The bank can and should do more, but the rest will have to be done by government spending and tax measures, so-called fiscal policy, of the kind that has already been proved effective in suppressing unemployment.

We’ll need $70 to $90 billion

We estimate that reducing unemployment by 1.5 percentage points by mid-2022 would require additional stimulus of A$70 billion to A$90 billion over the next two years, equivalent to between 3% and 4% of GDP.

This is on top of the more than $160 billion committed to JobKeeper and other coronavirus supports to date.

Here’s how we make the calculation.

First, to reduce unemployment by that much we estimate that real gross domestic product needs to grow by about 4 percentage points more than forecast over the next two years.

The estimate is based on previous work by economist Jeff Borland. Jeff kindly updated his calculation with us for this article, finding that each one percentage point increase in annual GDP growth reduces the unemployment rate by around 0.38 percentage points.




Read more:
Why even the best case for jobs isn’t good. We’ll need more JobKeeper


Second, we assume each dollar of stimulus in a particular year increases GDP in that year by between 80 cents and one dollar (some of the rest is saved and some leaks overseas).

This estimate of “fiscal multiplier” is slightly higher than that used by treasury during the global financial crisis but is in line with recent academic work finding that stimulus measures are more effective when monetary policy is out of ammunition.

If the fiscal multiplier isn’t as high – or if the recovery is more sluggish than expected, more stimulus might be needed.

There’s little risk of overkill…

A few weeks ago Reserve Bank Governor Philip Lowe raised the possibility that the crisis had pushed the minimum sustainable rate of unemployment higher, from 4.5% to nearer 5%, on the face of it making a case for less ambition.

His concern was “scarring” – the risk that some of the people who lose their jobs will become so damaged they become unsuitable for future employment, meaning that employers looking for staff would rather bid up the wages of existing workers than employ them, fuelling inflation.

But, if anything, his concern is a powerful argument for spending more, and more quickly, in order to avoid scarring. There’s good evidence sustained high unemployment hurts the economy in the long term.




Read more:
The charts that show coronavirus pushing up to a quarter of the workforce out of work


And if the extra spending did fuel inflation, it mightn’t be such a bad thing.

Inflation has been below the bank’s target for years. If it gets above it and becomes a problem, the bank can dampen it by raising rates.

…and little time to lose

The extra stimulus will need to be announced soon: on or well before the federal budget scheduled for October. Fiscal measures take time to have their biggest effect.

We are facing a “fiscal cliff” when measures including JobKeeper and the enhanced JobSeeker payment are withdrawn at the end of September. To escape it, they will need to be wound down more gradually, as the international Monetary Fund warned last week.

There are plenty of ways to maintain support including further cash payments to households, along the lines of those in the global financial crisis showed were effective in boosting spending, as well as spending on things such as social housing, roads and school maintenance.

Fear of debt needn’t hold us back

Extra stimulus will mean extra government debt. But the Australian government can now borrow for 10 years at a fixed interest rate below 1%. Adjusted for inflation, that’s a negative real interest rate, making debt more affordable than it has been in living memory.

There will naturally be concerns that further debt will place a burden on younger generations. But they are the generations that will be lumbered with the costs of worse than necessary unemployment, some of it very long term unemployment, unless we act.

In the worst case, they’ll ask why we didn’t do more.




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The Conversation


Brendan Coates, Program Director, Household Finances, Grattan Institute; Matthew Cowgill, Senior Associate, Grattan Institute, and Tony Chen, Researcher, Grattan Institute

This article is republished from The Conversation under a Creative Commons license. Read the original article.

How to improve JobKeeper (hint: it would help not to pay businesses late)



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Danielle Wood, Grattan Institute and Nathan Blane, Grattan Institute

JobKeeper has been a lifeline for the economy.

Given the ferocity of the economic hit caused by COVID-19, the government was right to prioritise speed over perfection.

But the current review of the A$70 billion provides an opportunity to iron out some of its crinkles.

The biggest priorities should be moving to upfront payments, expanding the scheme to cover temporary workers and short-term casuals, and avoiding the looming government support cliff.




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The government should also introduce a separate part-time payment rate, to better target the scheme and provide greater bang for buck.

The biggest barrier to the effectiveness of JobKeeper is the fact that the employer gets it in arrears, weeks after she or he has paid it to employees.

Stop paying businesses late

Businesses without the necessary cashflow have been encouraged to take advantage of government-backed loans, but for many the process has been too slow or unacceptably risky.

It might help explain why the take-up of the JobKeeper has been lower than expected.

Those cash-flow-constrained businesses that have been able to access finance have been forced to borrow on an ongoing basis in order to pay their workers.




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Given that the government now knows how much it needs to pay to businesses that are in the scheme, it would be very easy to switch to payment in advance by doubling up a payment – moving to being in step with, rather than behind, employers’ needs.

With government able to borrow so cheaply – at less than the rate of inflation – the fix would cost it little, and would add little to JobKeeper’s total cost.

The case for extending JobKeeper to temporary visa holders is clear cut.

Include more workers

Temporary visa holders can’t get safety net payments such as JobSeeker. And many of them are stuck here: there are no affordable options for them to return to their home country.

Leaving people without support does not do much for Australia’s reputation as a global citizen – many of the countries with which Australia normally compares itself have extended wage support to the wages of temporary residents.

It means JobKeeper is far less generous for businesses in sectors that rely on temporary visa holders, including the hard-hit sectors such as hospitality, retail, healthcare, and aged care.




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Why temporary migrants need JobKeeper


If temporary visa holders sign up to the scheme at the same rate as other residents, including them for six months would cost about $10 billion.

Short-term casuals – those who’ve worked for their employers for less than a year – have also been excluded, which has also left big holes in support for some of the worst-hit sectors and some of the lowest-income Australians.

Including short-term casuals would cost an extra $6 billion.

Pay part-timers less

JobKeeper pays all eligible workers at the same flat rate, regardless of the hours they worked before coronavirus hit or afterwards. More than 80% of part-time workers are believed to have received a pay rise under JobKeeper.

This means the scheme costs more than it needs to. It also raises questions about fairness between employees within businesses, because a part-time worker gets as much as full-time worker.

No doubt the government chose a flat rate to make the program simple, but a simple way to adapt the scheme would be to follow New Zealand and introduce a lower rate for people working less than 20 hours a week.




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It could mean that full-time employees on JobKeeper continued to receive $1,500 a fortnight, while employees working less than 20 hours a week got $800.

The saving, more than $2 billion per quarter, could be used to fund some of the extensions to the scheme we propose.

Extend it for businesses not recovered

The universal September 27 cut off date is blunt. It does not recognise that social distancing constraints will continue to affect some businesses for many months and that different sectors will bounce back at different rates.

Pulling back assistance on businesses that are still significantly revenue constrained risks undoing much of the good work JobKeeper has done to preserve jobs.




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Businesses currently receiving the payment should be required to re-test against the turnover requirement at the end of July and September. Where a business’s turnover climbs to higher than 80% of pre-crisis levels, support could be withdrawn with notice.

Businesses that remain below the recovery threshold in September should receive JobKeeper for an additional three months.

While the incentives would not be perfect – some businesses close to the threshold would have a short-term incentive to limit their recovery – it would be better than withdrawing support prematurely for scores of businesses.

JobKeeper is good, we can make it better

As well as being more effective in maintaining productive capacity, the approach we advocate would help cushion the “fiscal cliff” due at the end of September when all major coronavirus supports are due to come off at once.

Three months into its short life, JobKeeper is performing well. Now is the time to get it right.

Overall the proposed changes would cost a little more but they would better target the scheme and ensure it delivers on its promise of keeping Australians in jobs.The Conversation

Danielle Wood, Program Director, Budget Policy and Institutional Reform, Grattan Institute and Nathan Blane, Analyst, Grattan Institute

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Number of Australia’s vulnerable children is set to double as COVID-19 takes its toll



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Kate Noble, Victoria University; Peter Hurley, Victoria University, and Sergio Macklin, Victoria University

Three quarters of a million Australian children are likely to be experiencing employment stress in the family as a result of COVID-19. This is on top of around 615,000 children whose families were already dealing with employment stress, whose situation may have worsened.

Latest figures from the Australian Bureau of Statistics show 2.7 million people left their job or had their hours reduced between March and April. This means the jobs crisis is affecting 1.4 million Australian children, according to new modelling from the Mitchell Institute.

The stress and anxiety facing parents who have lost their jobs, coupled with social isolation and educational disruption, are likely to put many children at a significantly higher risk of poorer education and health outcomes.

Financial stress affects healthy development

A family’s socio-economic status is the biggest factor influencing children’s educational opportunities in Australia. Research by the Mitchell Institute has found children from struggling families are 10-20% more likely to be missing key educational milestones compared with their peers.



Children in families experiencing job loss are more like to start school developmentally vulnerable, to repeat a grade, to leave school early and may be less likely to attend university.

As stress in the home increases, children and young people’s health and well-being often suffers too. Extreme employment stress, for example in jobless households, can compromise the quality of parenting and home environments. Providing basic necessities can be challenging, and lead to poorer child nutrition.

Health and well-being issues caused by the crisis may undermine young people’s learning and efforts to reengage with school. Young people who don’t receive a good education are more likely to have poor longterm health outcomes.

Preschools and schools can help children recover

With schools and preschools now resuming something close to normal operations, it’s time to shift our collective focus from how we deliver education remotely, to how we support a huge newly vulnerable population of students.




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Many students will benefit by simply resuming learning and socialising at their preschool or school. Others will find life returns to normal as their parents return to work or find a new job, and their families regain financial security.

But previous recessions tell us recovery may be slow. For some parents, unemployment and underemployment will be prolonged, leaving many children, including some who were never previously considered vulnerable, at risk.

Teachers have shown agility, resilience and skill in the face of COVID-19. But preschools and schools aren’t equipped to deal with the huge upsurge in student vulnerability, on top of the upheaval of COVID-19.

Here’s what needs to happen

The Australian government has made childcare free for parents as part of a temporary relief package, but that policy is under review.

Governments must ensure children and families aren’t locked out of early education because they can’t afford it. Ensuring access is critical for children’s learning and development, as well as economic recovery through parental workforce participation.

Along with an emphasis on academic learning and re-engaging students with school routines, school children would benefit from an increased focus on health and well-being in schools. Supporting students to reconnect socially and build their own resilience will improve academic learning and should be central to schools’ efforts.




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Childcare is critical for COVID-19 recovery. We can’t just snap back to ‘normal’ funding arrangements


Links between schools and external social and health services also need to be strengthened to support children of all ages. Many of the issues that need to be addressed to reduce student vulnerability occur at home and in the community, requiring targeted and expert care from a range of non-school service providers.

Dedicated well-being staff could be employed in schools to facilitate these connections, and drive schools’ focus on health and well-being.

Senior secondary students face a high risk of disengagement from education as a result of disruption and parental unemployment. Prior to COVID-19, the cost of leaving school early was calculated at around $A900 million per year, per cohort. Helping students remain in education is critical to improving health and employment outcomes later in life.

Current funding arrangements will not enable preschools and schools to adequately respond to this unprecedented situation. Investing in prevention and outreach now is vastly more effective than dealing with the fallout later.The Conversation

Kate Noble, Education Policy Fellow, Mitchell Institute, Victoria University; Peter Hurley, Policy Fellow, Mitchell Institute, Victoria University, and Sergio Macklin, Deputy Lead of Education Policy, Mitchell Institute, Victoria University

This article is republished from The Conversation under a Creative Commons license. Read the original article.