Steven Hamilton, Crawford School of Public Policy, Australian National UniversityThe economic support package announced by Prime Minister Scott Morrison and NSW Premier Gladys Berejiklian is exactly what is needed, and just in the nick of time.
In a number of ways, in fact, it is more fit for purpose than the JobKeeper and JobSeeker policies that played such a key role in shielding the nation from the worst economic impacts of the COVID-19 pandemic.
There is support for workers who lose their jobs or have their hours cut, and incentives for affected businesses to keep their workers on the payroll.
In the face of what looks set to be an extended lockdown for Sydney, significant support was clearly needed. The federal government has rightly resisted calls to reinstate the JobKeeper wage subsidy, and opted instead for a new, more flexible scheme better suited to the circumstances.
There are two key planks of support, working together.
Payments to individuals
The first is payments for individuals. For Melbourne’s lockdown in late May and early June the federal government provided up to A$500 a week to those losing more than 20 hours of work a week. It is boosting this to $600 a week. For those losing eight to 20 hours a week, the payment is increasing from $325 to $375. The liquid assets test that applied to the Victorian payments has been scrapped.
Critically, any worker who loses enough hours is eligible. That means the payment can help virtually all workers losing work due to the lockdown, at least to some degree, and gives businesses the flexibility to scale down by reducing hours while minimising the impact on workers. We can squabble about the generosity of the payment, but it is more than double the rate of JobSeeker.
Importantly, it means the cost of the lockdown is being shared by the federal and state governments, rather than just falling on businesses and workers. This provides confidence that lockdown decisions will be made entirely in accordance with the public health advice.
Payments to businesses
The second plank is a partnership between the federal and state governments to revive the cash-flow boost instituted at the beginning of the pandemic, before the federal government introduced JobKeeper.
Only businesses with annual turnover between $75,000 and $50 million are eligible. For those suffering a 30% decline in annual turnover (compared to pre-pandemic times), the payment will cover 40% of their payroll costs up to a maximum of $10,000 a week. To qualify, however, they must not lay off any staff.
This emulates one of the best features of JobKeeper by maintaining the connection between employers and employees through the crisis to speed the recovery once restrictions lift.
Improvements on JobKeeper
In his press conference, the Prime Minister described the measures as targeted, timely, proportionate, scalable and able to be administered quickly and simply.
It’s hard to disagree.
One aspect that’s a big improvement over JobKeeper is that the turnover test is based on actual turnover, rather than projected turnover or trailing turnover, as with the earlier schemes. This should see the money better targeted to the businesses genuinely in need.
Another improvement is that it drops the cumbersome JobKeeper approach of paying employers a per-employee subsidy they were then expected to pass on to each worker at a fixed rate regardless of actual hours. This time businesses will get a payroll subsidy they can use however they see fit — so long as they don’t lay anyone off.
This should maximise flexibility, and minimise business failures and layoffs. And compliance should be straightforward to enforce via Business Activity Statements and Single Touch Payroll records.
But it is all a bit reactive
I do, however, see one negative.
Just as many ordinary Australians seem to have assumed and behaved as though the pandemic was behind us, so did the federal government in configuring its fiscal support measures earlier this year.
It was right to end the JobSeeker supplement and JobKeeper as the economy recovered. But it was wrong not to replace them with a suite of more flexible, contingent measures to be triggered in the event of future lockdowns. It should have foreseen the possibility of a future prolonged lockdown and been prepared for it, rather than be forced to play catch-up.
Following the announcement of these measures, the federal minister for government services, Linda Reynolds, said “our response will continue to evolve”. But what businesses and consumers have needed all along is certainty — to know that if things go pear-shaped there’s a plan and they will be looked after.
Without that certainty, consumers will hold back on spending and businesses will hold back on investment, putting a brake on the economic recovery.
Every Australian consumer, worker and business — in every Australian state and territory — needs to know today exactly how they’ll be supported should things get a lot worse or go on a lot longer than currently expected.
Steven Hamilton, Visiting Fellow, Tax and Transfer Policy Institute, Crawford School of Public Policy, Australian National University
Kathryn Daley, RMIT University; Belinda Johnson, RMIT University, and Patrick O’Keeffe, RMIT UniversityOf the more than 870,000 Australians who lost their jobs in the first few months of the COVID-19 crisis, 332,200 – or 38% – were young Australians aged 15-24.
By June 2020, as the overall unemployment rate hit 7.4%, the youth unemployment rate spiked to 16.4%, with a further 19.7% underemployed (working fewer hours than they wanted).
As of February the overall unemployment rate had fallen to 5.8%, compared with 5.1% in February 2020. The youth unemployment rate meanwhile was 12.9%, compared with 11.5% the year before, and a further 16% were underemployed.
Prime Minister Scott Morrison has enthused about there now being “more jobs in the Australian economy than there were before the pandemic”. But that’s true only for those 25 and older: 77,600 more are employed than before the crisis. For those aged 24 and under, 74,100 fewer have jobs.
So clearly the pandemic has hit younger workers the hardest. The reasons for disproportionate impact aren’t complicated. Young people are more likely to work in casual jobs – the first to be excised in hard economic times – and in those sectors most affected by border closures, lockdowns and other measures – retail, hospitality, tourism.
Yet the federal government’s policy responses, injecting billions of dollars into the economy to support businesses and employment, have compounded this impact through deliberate yet flawed policy design.
JobKeeper has kept proportionally fewer young people in jobs. Changes allowing withdrawal of superannuation will hurt them more in the longer term. And JobMaker, the program designed specifically to encourage employment of younger workers, has proven a monumental flop.
Shut out of JobKeeper
The centrepiece of the federal government’s support measures was the A$100 billion JobKeeper program, initially paying a subsidy of $750 a week before tapering and finally being axed at the end of March.
The Reserve Bank of Australia estimates JobKeeper payments kept at least 700,000 workers off the dole queue. But to qualify, employees had to have been working for their employer for a minimum of 12 months.
This disproportionately excluded younger workers – being more likely to be recent workforce entrants, to switch jobs more than older workers, and to be in employed in casual or other forms of insecure work.
To illustrate, Australian Bureau of Statistics data from August 2019 shows young people comprised 17% of the workforce yet accounted for 46% of all short-term casual employees.
Of those employed casually, 26.4% of young people had been with their employer for less than 12 months, compared to 6.5% of those aged 25 and over. So one in four young people employed casually were not eligible for JobKeeper, compared with only one in 16 of their older counterparts.
Drawing down superannuation
JobKeeper’s design thus pushed proportionally more younger workers on to the dole queue. It also likely contributed to more of them dipping into their superannuation savings under the provisions announced by the federal government in March 2020.
Those provisions allowed Australians affected by the economic crisis to withdraw up to $20,000 from their superannuation accounts (in two rounds of $10,000 each – one last financial year, another this financial year).
The Industry Super Australia estimated about 395,000 people under 35 completely drained their super accounts.
This emptying of accounts is not surprising given the average superannuation balance by age 30 is about $28,000 for men and $23,700 for women.
But it means many will have considerably less super to retire on. The long-term cost of a 25 year-old withdrawing $20,000 is more than $100,000, compared with about $37,000 for a 50-year-old, according to estimates by financial comparison site Canstar.
Spend now, lose later
There’s also evidence the design of the super-access scheme has allowed unnecessary withdrawals. While those taking out money have had to declare they need the money to pay for essential items (such as rent or bills), there has been no scrutiny of this prior to approval.
Indeed, according to credit-scoring company Illion about two-thirds of the funds withdrawn this financial year was spent on discretionary items such as clothing, furniture, restaurants and alcohol.
As former prime minister Paul Keating has put it, the government has relied on individuals “ratting their own savings” to buttress its own stimulus spending.
More work needed
The one program meant to specifically address youth unemployment, the JobMaker Hiring Credit, has so far proven a failure. Its aim is to incentivise employers to hire job seekers aged 16 to35 with a weekly $200 subsidy, creating 450,000 jobs over two years. But in late March, Treasury officials revealed it had so far led to just 609 hires.
All unemployment is costly for individuals, families and the wider community. But high and long-term youth unemployment can have particularly dire consequences that reverberate for decades. It creates the risk of “scarring”, suppressing an individual’s job and income prospects over their entire life. That ultimately requires the government picking up the tab.
Youth unemployment was already a significant issue prior to the COVID crisis. Now, with younger people hit hardest by the pandemic’s economic impacts, it’s imperative to ensure an entire generation is not permanently disadvantaged.
Kathryn Daley, Senior Lecturer & Program Manager – Youth Work and Youth Studies. School of Global, Urban and Social Studies, RMIT University, RMIT University; Belinda Johnson, Lecturer and Program Manager, Social Science (Psychology), School of Global, Urban and Social Studies, RMIT University, RMIT University, and Patrick O’Keeffe, Lecturer, Bachelor of Youth Work and Youth Studies, RMIT University
Simone Casey, RMIT University and Liss Ralston, Swinburne University of TechnologyMany Australians whose jobs were decimated by the COVID business shutdowns will soon be waking up to new income shocks and the prospect of rental stress. This is because people whose employers can’t afford to keep them on will suddenly lose more than A$300 per week when the JobKeeper scheme ends on March 28. Worryingly, this income shock will happen just days before the payment to people on the JobSeeker benefit is effectively cut by $100 per fortnight.
At that point, all income support recipients – more than 2.6 million people – will be below the poverty line and many will face extreme rental stress.
This income shock has been anticipated for some time, but what does it means for rates of rental stress, particularly in Victoria? Despite promising signs of recovery, Victorian jobs lost in the COVID-induced recession, such as in the hard-hit business tourism and live music industries, have not bounced back at the same rate as others.
What will happen to rental affordability?
To illustrate this point we have modelled housing affordability for single people who were on either the full-time or part-time JobKeeper rate. In this scenario, they could also get JobSeeker payments at a part-rate because of the temporary increase in the income-free threshold to $300. This made them eligible for Commonwealth Rent Assistance too.
The chart below shows the impacts on income and rental affordability when JobKeeper and Coronavirus Supplement payments end. Their incomes and the amount of rent they can afford are roughly halved.
Full-time and part-time single workers were able to afford weekly rent of $265 and $245 respectively before the withdrawal of JobKeeper. Afterwards, affordable rent goes down to $115 per week. That’s about $110 less than the $450 median rent ($225 per person) for a two-bedroom share house in Melbourne.
Based on our earlier calculations, this leaves these renters with only $17.57 per day to meet basic costs. They have a lavish $3.57 per day more than they did before the pandemic to pay for food, utilities and job-seeking costs such as mobile phone plans and travel cards (A$4.40 a day in Melbourne).
What is different now than for pre-COVID unemployment was that business shutdowns thrust people who had reliable earnings – and accompanying high rents and mortgages in metropolitan areas – onto JobSeeker and JobKeeper payments.
The chart below shows the change in rental affordability for a number of household types before the pandemic and during the Coronavirus Supplement stages (i.e. payments of $550, then $250, then $150).
For example, when their income was highest during the $550 stage, two singles sharing could afford rent of $430 per week. Once the supplement ends and is replaced by the $25-a-week increase in JobSeeker payment, affordable rent declines to only $230 per week or $115 each.
Rental affordability for single-parent households is notable here because the COVID Supplement was payable to one person only. Once the supplement is withdrawn, they will again be disadvantaged relative to other households because they will not be receiving the increase in the JobSeeker payment.
What sort of job losses can we expect?
It is hard to predict exactly how many people will lose their jobs when JobKeeper ends. What we do know is the economic recovery in Victoria has lagged behind the other states. We also know that at the end of December 2020 1.55 million people were on JobKeeper and a large proportion of them (626,000) were in Victoria.
Economist Jeff Borland conservatively estimates national job losses could range between 125,000 and 250,000. It is reasonable to expect as many as half of these could be in Victoria.
Our analysis also shows there are worrying signs that the economic recovery celebrated in the January labour force data was not sustained in February. The latest data provided to a Senate inquiry into COVID-19 show JobSeeker recipients increased by 7,267 between January and February. The increase in Victoria could be attributed to the temporary Christmas retail boom, but in states like New South Wales and Queensland claims decreased slightly.
While fewer people will lose their jobs in other states than in Victoria when JobKeeper is withdrawn, they are not immune to this income shock. We created the chart below to show the overall scale of the coming problem of rental stress when the fortnightly $150 Coronavirus Supplement disappears and is replaced by the $50 JobSeeker increase.
Once the supplement reduced to $250 per fortnight, singles and single parents with two children were below the poverty line. When it was reduced to $150, the number of household types in poverty increased again. From April 1, all income support recipients – covering more than 2.6 million people including children – will be waking up to poverty and the prospect of extreme rental stress.
What can be done to avoid this?
So how can governments prevent people from falling off the rental cliff? It is unlikely to be achieved by introducing cut-price flights to Far North Queensland.
A new range of strategies will be needed. These include options advocated by ACOSS and others to increase the maximum rate of Commonwealth Rent Assistance by 50%, increase the JobSeeker base rate above the poverty line and introduce rental stress grants targeted at individuals who need help.
Over the longer term, there is also a need to adopt strategic approaches to increase the supply of affordable rental housing such as those recommended by researchers at the Australian Housing and Urban Research Institute (AHURI).
There’s a lot to like about the JobMaker Hiring Credit announced in the budget.
As lockdowns ease, it’s logical to cautiously move from protecting jobs in struggling sectors to generating new jobs in growing ones.
For the next year, employers who take on a new worker who has been on JobSeeker or a related benefit will receive A$200 per week for up to 12 months if the worker is aged 16 to 29 years, or $100 per week if aged 30 to 35 years.
The employer will have to demonstrate that the new worker will increase overall
headcount and payroll, and the payment will top out at $10,400 per position.
The budget says it will support 450,000 jobs.
Many will simply be brought forward, created earlier than they would have been; but this itself should be helpful, contributing to a virtuous cycle of employment, confidence, and consumer demand.
Past experience suggests that about 10% will be truly additional – jobs that wouldn’t have been created without the subsidy.
Cheaper per job than tax cuts
But even then, unlike the personal tax cuts, which the Australian Council of Social Service believes will cost $475,000 per job created, the cost per job would be a more modest $80,000.
More importantly, the hiring credit could prompt employers to take on people they might not otherwise have considered – those facing prolonged unemployment.
It is likely that by next year, more than a million people will be on unemployment payments for over a year – three times the peak in long-term unemployment after the early-90s recession.
Young people – those under 35 – have been targeted because they lost far more jobs in this recession than older people.
Employment by age, change since February 2020
Limited work experience and qualifications means many young people will find themselves out of paid work for a long time.
But they’re not the only ones. There are already over 600,000 people long-term unemployed on benefits for more than a year, most of whom are over 40. Older unemployed people are right to be concerned the wage subsidy might encourage employers to overlook them for younger applicants.
Room for improvement
It’d be better to also target the subsidy to the duration of unemployment; for example to young people unemployed for six months, and others out of paid work for at least a year.
Otherwise a large and diverse set of talents might be wasted.
The subsidies might also be too low. $200 per week is around a quarter of the full-time minimum wage, enough to encourage employers to expand entry-level jobs of around 20 hours a week but perhaps not enough to encourage employers to expand full-time jobs.
This could hasten the shift already under way from fulltime to part-time employment in entry-level jobs in retail, hospitality and other industries. That might reduce unemployment in the short-term, but at the expense of entrenching higher levels of under-employment (people lacking the paid working hours they need).
Another issue is administration. An employment service on the ground would be better at matching the needs of workers and employers and organising pre-vocational training than workers and employers left to their own devices.
It’ll be important to avoid abuses
That could also help ensure the integrity of the scheme. Wage subsidy schemes give rise to concerns that existing workers may be displaced, or that people could be laid off when the subsidy ends regardless of their performance.
Guaranteeing the integrity of the scheme will be vital to ensure it’s fair to all involved and to sustain public support for it.
JobMaker is a welcome innovation, the logical next step after JobKeeper.
If, together with a scaling up of existing wage subsidy schemes, it generates full and part-time jobs for people of all ages who would otherwise be left behind, it could make a real difference.
This week, support to unemployed Australians will be dramatically reduced.
In April, the new Coronavirus Supplement roughly doubled the level of benefits for unemployed people on the JobSeeker payment and a range of other working-age payments.
The supplement will drop from $550 to $250 a fortnight from Friday. This is before it is dropped entirely at the end of 2020.
While there has been increasing pressure from welfare groups to maintain a higher level of JobSeeker supplement, there have also been calls from within the government to remove extra supports, amid claims people are not looking for work.
Prime Minister Scott Morrison has warned about increased unemployment payments. As he said in June,
what we have to be worried about now is that we can’t allow the JobSeeker payment to become an impediment to people going out and doing work, getting extra shifts.
But will cutting support to unemployed Australians really help them get a job?
Our analysis shows there is considerable scope to increase JobSeeker payments before they might hinder people’s motivation to find paid work.
Lack of job searching is not the problem
Right now, there is little evidence a lack of job search effort is a significant problem for the economy.
Around 6.8% of the workforce is looking for work. But in July, Treasurer Josh Frydenberg acknowledged the real unemployment rate was closer to 13.3%, when “discouraged jobseekers” — not actively looking for work because their business is locked down or on hold — are included.
In fact, for the longer term health of the economy, it is important people find jobs that suit their skills. International evidence shows the provision of unemployment benefits slightly increase both the wages received when work is found and the stability (or duration) of the new job.
But would higher benefits be a problem as the economy recovers?
If benefits start to approach the level of minimum wages, some workers with low earning potential might decide the extra effort is not worth it — and so reduce their job search effort.
As the economy recovers, this will mean some potential jobs will go unfilled and government expenditure on JobSeeker will remain unnecessarily high.
Comparing JobSeeker to the minimum wage
However, our analysis shows Australia is in no danger of creating a disincentive for people to seek work because of higher JobSeeker payments.
We have compared Newstart and JobSeeker payments for single people with the minimum adult full-time wage (after tax) over the past three decades. This is a standard benchmark for assessing incentives to move from welfare benefits into work — assuming work is available.
Our analysis also looks at the payments provided to single pensioners. Pensioners received around 55% of the minimum wage up until 2009, when the pension was increased under the Rudd government. After that, net pension income was around 65% of the minimum wage. This is close to the commonly used poverty line, set at half the median household disposable income.
But for unemployed people on JobSeeker (or its predecessor, Newstart), the past two decades have seen a steady decline in their position relative to the minimum wage. It has fallen from around 50% in the 1990s to under 40% at the start of 2020 — well below the poverty line.
These calculations changed with the introduction of the Coronavirus Supplement in April, which almost doubled the payment for single unemployed people. Nonetheless, JobSeeker plus the supplement was still well below the adult minimum wage (76%, or 82% if we add shared accommodation rent assistance).
On September 25, the Coronavirus Supplement will drop by $300 a fortnight. And the combined JobSeeker/supplement payment will fall back to 55% of the minimum wage until December 31.
Unless the federal government makes further changes, the supplement will be removed entirely at the end of the year. So those on JobSeeker will be back receiving less than 40% of the minimum wage.
The crisis isn’t over, why is support being wound back?
Neither the pandemic nor the economic crisis will be over by the end of 2020.
As the wage subsidy program JobKeeper is also wound back, next week and then again, next year, increasing numbers will become reliant upon JobSeeker.
If the payment reductions continue as forecast, this will force many people well below the poverty line. A recent Australian National University analysis estimated an extra 740,000 people will be pushed into poverty.
This would not only be a disaster for the people directly affected, but also likely have large adverse economic effects. Deloitte Access Economics estimates withdrawing the Coronavirus Supplement support would be equal to a reduction in the size of the economy of $31.3 billion and an average loss of 145,000 full-time equivalent jobs.
The case to maintain much of the crisis-induced increase in payments is clear. In the short term, there will be no shortage of people looking for work. Maintaining payments at around the pension level — close to the poverty line — should be our policy objective.
Even in the longer term, as labour demand increases, the large gap between welfare payments and minimum wages leaves plenty of room for permanent increases in income support, without creating a disincentive for people to look for work.
At a minimum, permanently increasing JobSeeker to 50% of the minimum wage — as was the case in the 1990s — should be an easily achievable target for Australia as it makes it way through the economic wreckage of COVID-19.
Bruce Bradbury, Associate Professor, Social Policy Research Centre, UNSW and Peter Whiteford, Professor, Crawford School of Public Policy, Australian National University
Australian National University calculations suggest JobKeeper and the boosted JobSeeker payment have saved about 2.2 million people from poverty.
It’s a remarkable outcome without precedent in Australia.
Both are well above the poverty line, which according to our modelling is around $816 per fortnight.
From the end of September both will be cut. JobKeeper will fall to $1,200 per fortnight for those who previously worked 20 or more hours per week and to just $700 for those who previously worked less than 20 hours per week.
The payment to people on JobSeeker and related benefits will fall to $815.
Beyond December, JobKeeper will fall to $1,000 and $650 per fortnight and the Coronavirus Supplement will end, returning JobSeeker to $565.70 per fortnight.
Three quarters of a million more
Our estimates suggest that by themselves these changes will push an extra 740,000 Australians into poverty, lifting the total number in poverty from from 1.1 million to 1.84 million.
Partly offsetting this, the improvement in the economy forecast in the July Economic and Fiscal Update should it be realised would cut the number of Australians in poverty by about 140,000.
These numbers tell us two important things.
One is that the Newstart unemployment benefit (now called JobSeeker) was too low.
Treasurer Josh Frydenberg seemed to acknowledge this when he announced the doubling in March, saying it would allow unemployed people to “meet the costs of their groceries and other bills”.
The other is that without (and even with) JobKeeper, many, many more people would have been pushed on to it.
We define poverty an equivalised household income of less than half the median household income.
What it would do to the poverty gap
We define the “poverty gap” as the total difference in income between those households below that poverty line and the poverty line.
Prior to COVID-19 it was A$5.9 billion.
Should the unemployment rate stay at its present 7.5% after JobKeeper is withdrawn and JobSeeker returned to normal we expect it to climb to $6.5 billion.
It’s in all of our interests to minimise it for any given level of government support.
The ANU Centre for Social Research and Methods has developed an algorithm for calculating the optimal mix of government supports to achieve a range of policy goals including minimising poverty.
The mix it suggests would cut the poverty gap from $6.5 billion to $5.6 billion under the 7.5% unemployment scenario and from $6.9 billion to 5.8 billion under the 10% unemployment scenario.
How to minimise the damage
If the total level of welfare expenditure were to remain unchanged on pre-JobKeeper and Coronavirus supplement settings, the single JobSeeker would be increased substantially from $551 to $821 per fortnight and the age pension single rate from $902 to $915 per fortnight.
The increases would be offset by reductions in the Parenting Payment from $770 to $737 per fortnight (single), Family Tax Benefit Part A for children under 13 years of age from $218 to $154 per fortnight and Rent Assistance from $137 to $131 per fortnight.
We have also modelled the optimal setting for a 20% increase in government support and a 20% cut.
What our algorithm proposes wouldn’t eliminate poverty (it would cut it by between 14% and 15%) but it would enable to the government to achieve a lot without spending more money.
An essential part of whatever solution it adopts has to be an increase in JobSeeker. Without it an extra 740,000 Australians will be in poverty.
Ben Phillips, Associate Professor, Centre for Social Research and Methods, Director, Centre for Economic Policy Research (CEPR), Australian National University; Matthew Gray, Director, ANU Centre for Social Research and Methods, Australian National University, and Nicholas Biddle, Professor of Economics and Public Policy, ANU College of Arts and Social Sciences, Australian National University
Six out of every ten of the 2.24 million people set to be on JobKeeper in the December quarter are expected to be in Victoria, according to estimates issued by Treasurer Josh Frydenberg.
Looking ahead to the 2021 March quarter, Treasury estimates about 60% of 1.75 million expected to be on the scheme will be in the state which is currently under a hard lockdown. Parliament this week is set to extend the scheme, in a scaled down version, for six months from the end of September.
Releasing the Treasury analysis of data on spending from the Commonwealth Bank and unemployment benefits Frydenberg said: “Restrictions imposed by the Victorian government have had a devastating impact on the economy.
“The number of Victorians on unemployment benefits has significantly increased with the impost of restrictions while numbers in other states have declined.
“At the same time household spending in Victoria is down more than 30% through the year while the rest of Australia is only down around 3%.
“The accommodation and hospitality sector has borne the brunt of the restrictions with the growth in spending in dining and takeaway down more than 60% and in the accommodation sector more than 80%.
“In July the effective unemployment rate in Victoria, before the stage four lockdown, was around 10.5%, while it was around 8.5% in NSW where they are managing the virus and have reopened their economy.”
Earlier Frydenberg, criticising Premier Daniel Andrews, told Sky, “I want to hear more about a message of hope for the people of Victoria. Daniel Andrews and the Victorian government need to be talking more about the road out than about a longer road in”.
He attacked the “over-reach” and “very bad call” by Andrews in seeking a year’s extension of the state’s emergency powers legislation. This is now being negotiated with the Victorian upper house crossbenchers for a reduced length of time.
Frydenberg said there had been a “litany” of failures in Victoria.
It was only a fortnight from the scheduled end of the stage 4 restrictions and “businesses are in the dark as to how they’ll get their workers back and their doors open,” he said.
But with the latest Victorian tally of 114 new cases and 11 deaths, Andrews on Sunday said it was too early to put forward a definitive plan for reopening.
The Treasury analysis shows that through May, as restrictions eased in Victoria, numbers on unemployment benefits fell and spending recovered, as elsewhere in the country. But since July Victoria’s story has been different from that of other states.
Since late June Victorians on unemployment benefits rose by 27,600 (7.2%). More than half the increase was in the three weeks to August 21, when the stage 4 lockdown was operating.
According to Treasury’s analysis of the Commonwealth Bank data, since the Victorian lockdown was reimposed, there has been a large fall in Victorian household spending growth relative to elsewhere.
It has declined from about 0% through the year in mid-July, to be down about 30% through the year in recent weeks.
In contrast, spending growth was 3% down over the year in the rest of the country.
As with the initial lockdown, the reimposition of restrictions in Victoria led to a significant fall in discretionary spending growth – but the move to stage 4 hit spending harder. Growth in discretionary spending in the state was about minus 40% through the year in mid-April. As things eased it improved to about minus 5% through the year in mid-June. Then it has fallen to about minus 45% through the year in recent weeks.
The metropolitan area has been harder hit than regional areas of Victoria.
The number on unemployment benefits has risen by 7-8% across Melbourne since restrictions started to be reimposed, compared with 3% in regional Victoria.
Over the same time, household spending growth across Melbourne and regional Victoria has fallen by similar amounts. But because of a limited recovery in this spending when restrictions were eased, through-the-year spending growth in Melbourne is presently about 24 percentage points below pre-COVID levels, while spending in regional areas is about 5 percentage points lower than before COVID.
Frydenberg said more than $12 billion in JobKeeper payments and about $6 billion CashFlow Boost credits had been delivered to Victorian businesses and employees.
Polling from the Australia Institute, a progressive think tank, done late last week found when people were asked which level of government was doing a better job handling the COVID crisis, 31% thought their state or territory government, compared to 25% who said the federal government, and 32% who thought both governments were doing an equally good job. Some 13% said they didn’t know or were not sure.
But in Victoria only 25% said the state government was doing a better job, compared with 32% who nominated the federal government and 31% who rated both governments equally.
Childcare services and most preschools have remained open throughout the COVID-19 restrictions in Australia. From Wednesday, however, Melbourne’s stage 4 restrictions mean most children (except for vulnerable children and those of essential workers) in metropolitan Melbourne will no longer be able to attend early childhood education and care for at least six weeks.
Kindergarten and early childhood centres in regional Victoria, however, remain open to all children.
So, what will not being able to send children to childcare or preschool mean for Melbourne’s families and the early childhood education and care sector?
What it means for families
Around 287,000 children aged 0-4 live in Melbourne. Of these, one-fifth of one year olds and around 90% of four year olds attend a range of early childhood education and care services and preschools.
Most of these children will have to stay at home with their families for at least six weeks, plus school holidays for children attending sessional kindergarten.
Only children whose parents work in permitted industries, or vulnerable children (presumably those in contact with the child protection system or who have a disability, although the details have not yet been announced) will have access to early learning services during this period.
Parents will face similar challenges as parents whose young school children were learning from home in terms two and three. But they’ll be doing this with younger children with different (often greater) needs, without the learning and developmental remote support being provided by schools.
Recent research with parents of schoolchildren shows this is likely to take a significant emotional toll as parents attempt to balance care, early learning and paid work. Guilt and anxiety about not doing any of these jobs well is common among parents.
Women are likely to carry a disproportionate share of the load, and may reduce work hours to support their family. Workforce participation by Australian women already lags behind many countries with more generous childcare policies.
What has the government done?
The government put in place a relief package in April to support families and services in the early childhood education and care sector, because many people pulled their children out of childcare.
The government provided centres with around 50% of their revenue based on enrolment numbers between February 17 and March 2, on the basis parents weren’t charged any fees. Services were also able to access JobKeeper for eligible employees.
Childcare was the first sector to lose JobKeeper in July, as part of the transition back to pre-COVID funding arrangements. The federal government is providing a transition payment to operators until September 27. The payment makes up 25% of the childcare service fee revenue from February 17 – March 1.
This is one way of addressing the fact only a few early childhood education and care workers are eligible for JobKeeper. The Minister for Education Dan Tehan told a press conference on Tuesday nearly one-third of the early childhood workforce weren’t eligible for the package.
Parents whose income has been reduced due to COVID-19 are eligible for an increase in subsidised hours (up to 100 per week), but they’ll still have to pay the gap fees. For many families who have lost income, these fees are likely to be unaffordable, and the increased allowance won’t make a difference.
Dan Tehan said on Tuesday the federal government (which funds the childcare sector) is working with Victoria on a suitable arrangement for parents and the sector during the stage 4 restrictions. Further announcements are expected later this week.
Will the sector survive a six-week shutdown?
Australia’s mixed model of childcare provision means unlike government schools, there won’t be a common plan rolled out across the sector. Private companies and non-profit and community organisations will need to assess their own situations, make their own plans, and communicate these with families.
Even before the latest restrictions, many providers were struggling to adjust to the transition arrangements and meet additional COVID-related costs. There are instances of services charging parents fees when children were absent, where providers were unable to manage any reduction in income.
Some providers have exhausted their financial reserves and are facing serious financial difficulty.
Some providers have said closing for six weeks is easier than remaining open with low numbers.
Support to providers will be critical to ensuring services can remain open for families of permitted workers, and open their doors too all families as restrictions are eased.
What are the options, and what if this happens again?
The transition payment to childcare operators was designed to support the shift back to stage one and two restrictions — it is not fit for stage 3 or 4 restrictions. This payment to providers should be increased to ensure they can survive the next few months.
The government should be considering several options, geared towards minimising damage and disruption for children, families and the sector.
JobKeeper could be reintroduced for early childhood educators to protect educators’ jobs and support services. But while JobKeeper provided a guaranteed level of funding to support employers and employees, large numbers of casual early childhood educators were not eligible.
A better option would be to temporarily increase the federal government’s transition payment to services, with the remainder of services’ revenue made up by fees from parents whose children are still attending, and federal government subsidies. This could also be improved by strengthening the employment guarantee provisions for educators.
The employment guarantee linked to the transitional payment only requires employees to keep their jobs, which for many casuals may mean only a few shifts per week.
This may not be the last time we experience stage 4 restrictions in Australia. The childcare sector has been near collapse, followed by government rescue twice in 2020, in stark contrast with the stable schools system, that has been able to focus all their attention on children’s and educators’ learning and well-being.
It’s time for Australia to get serious about developing a more sustainable system that provides high quality and genuinely affordable early learning to all Australians, which is not at constant risk of collapse as we navigate the challenges of COVID-19.
At A$1,500 a fortnight, JobKeeper has been nothing but a help to the people on it.
The rules required those who had previously been paid more than JobKeeper to stay on their old wage, with the rest topped up by their employer. Those who had previously been paid less (one quarter of them) got a pay rise.
It’ll be less rewarding from the end of September. That’s when it’ll fall to $1,200 per fortnight for people who had previously been working 20 hours or more hours per week, and $750 per fortnight for people who had previously been working less than that.
At the same time, the temporary coronavirus supplement paid to Australians on JobSeeker and other benefits will fall from $550 a fortnight to just $250.
Those receiving only the full-time JobKeeper rate can expect their incomes to fall by 20%. Those on the part-time rate can expect their income to halve.
But the good news is that at least some will be able to top up their incomes by applying for JobSeeker.
JobKeeper and JobSeeker
Many will be able to apply to recieve both.
They will need to satisfy the assets test for JobSeeker, which is being re-imposed from September 25. It will deny JobSeeker to single homeowners with assets of more than $268,000 in addition to their home, and to single non-home owners with assets of more than $482,500.
They would also need to wait for a reimposed liquid assets waiting period of between one and 13 weeks, depending how much money they have in their bank accounts.
Their partners would need to earn less than $3,068 a fortnight, or roughly $80,000 a year.
And they will be required to make at least one phone or online appointment per week with an employment services provider.
Up to $554 on top of JobKeeper
Our calculations suggest that under the new rules from late September, such a person on the part-time JobKeeper rate of $750 a fortnight should be able to claim up to an extra $554 in JobSeeker – taking their total income to $1,304 per fortnight – only $196 per fortnight less than they got when JobKeeper was $1,500 per fortnight.
It gets better. Even people getting the new lower full-time JobKeeper rate of $1,200 per fortnight will be able to get some JobSeeker if they fit through the hoops.
Our calculations suggest they will be eligible for up to $284 per fortnight JobSeeker top-up, taking their total income to $1,484 for fortnight, only $16 per fortnight less than they are receiving now.
It gets better still. If they pass through the hoops, they will also become eligible for other benefits such as a Commonwealth Health Care Card, Family Tax Benefit part A if they have kids, and rent assistance if renting.
The treasury believes 245,000 Australians will be on both JobKeeper and JobSeeker by the end of the year.
You’ll have to apply
One of the virtues of the original JobKeeper was that, from the point of view of the recipient, it was automatic. Once their employer decided to apply for it, there was nothing else they needed to do.
As JobKeeper is phased down and JobSeeker returns to its traditional role of supporting Australians on low incomes, there will be a lot more they need to do.
Some won’t bother, and some won’t succeed, but at least until the end of the year it’ll be possible for some Australians on JobKeeper to get more or less what they were getting before.
It’s less good for those pushed out of work
It’s worth sparing a thought for those that will lose their jobs as JobKeeper winds down.
In October, employers wanting to stay on JobKeeper will have to be retested and approved, and in January retested and approved again.
Many will miss out. Retesting is expected to reduce the number of workers on JobKeeper by 60% over the last three months of this year and by a further ten percentage points over the first three months of next year.
If those whose lose JobKeeper also lose their jobs — and many will — they’ll have to make do with the much lower JobSeeker payment of about $825 a fortnight, not much more than half of the $1,500 a fortnight they had.
Treasury expects 1.5 million people to be on JobSeeker by the end of the year.
It expects some 245,000 to recieve both JobSeeker and JobKeeper. That will leave around 1.25 million to get by on the lower JobSeeker alone.