Number receiving payments set to continue to increase through rest of year
Reducing COVID-19 support for struggling Australians will hamper economic recovery in the next two years – causing GDP to decline and unemployment numbers to rise, Deloitte analysts forecast.
The Morrison government earlier said it would proceed with slashing the $550 fortnightly coronavirus supplement by $300 starting on Sept. 25 until the payouts end entirely on Dec. 31.
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Once the government pulls the plug on the additional support, welfare payouts will revert to the single JobSeeker benefit, with a base rate of $815 fortnightly.
The move will leave 1.5 million out-of-work Australians with less cash to circulate into the economy.
‘Out of recession’
The planned reduction will likely have a devastating ripple effect across the country.
“The economy is in a deep recession, and so reducing government spending would hurt more than if the economy were in good shape,” analysts from Deloitte Access Economics said.
GDP is set to decline by $31.3bn while 145,000 full-time jobs, on average, are expected to be shed in the next two years, according to the report commissioned by the Australian Council of Social Service.
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“This equates to an average reduction in employment of around 1.28% during this period. As with GDP, most of the employment losses occur in 2021-22,” the report said.
However, every dollar the government invests in JobSeeker benefits produces a significant economic return – “helping to pave the road out of recession,” said Deloitte partner Nicki Hutley.
“Providing people without paid work with enough to get by is highly effective economic stimulus, as they have little choice but to spend straight away on essentials,” she said.
“People on higher incomes have the option of saving, which many are doing right now given the uncertainty of the pandemic,” Hutley said.
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Deloitte analysts expect the number of welfare recipients to rise from 2.25 million in July to 2.34 million by the end of the year. Extending the program beyond the deadline, however, could see the number of beneficiaries decrease to 1.73 million by mid-2022.
But discontinuing the supplement would set regional Australia at a further disadvantage. The cuts would leave the biggest impact on remote and regional communities in the Northern Territory, Queensland and Western Australia, as well as in locked-down Victoria, the data revealed.
The COVID-19 unemployment benefit would have been one of the single largest measures to reduce inequality in Australia, the analysts said.
“With the economic consequences of COVID-19 most harshly impacting lower-income households, the benefits now are likely to be even greater,” they said.