JobKeeper and JobSeeker 2.0: AMP Capital’s Diana Mousina tells you what you need to know
The Federal Government revealed last week, the largest budget deficit since World War II. But talking microeconomics, what does this mean for the Australian public?
Prime Minister Scott Morrison and Treasurer Josh Frydenberg revealed a number of key things to help Australians navigate their way through the continuing COVID-19 pandemic.
We will see JobKeeper and JobSeeker extended through till March 2021, with new rates, which will not just alleviate pressure on businesses, but will also provide continuing financial assistance to individuals.
From 28 September, for JobKeeper, the current subsidy of $1,500 will reduce to $1,200 per fortnight and $750 for those working less than 20 hours a week.
And from 4 January, until 28 March, the top tier will receive $1,000 per fortnight and the bottom, $650 per fortnight.
And for those Australians on JobSeeker, the supplement will be reduced by $300 to $250 a fortnight from 25 September.
But with unemployment figures expected to peak at about 9 per cent in December, TOGETHER Australia speaks with AMP Capital’s Senior Economist Diana Mousina about how the changes to JobSeeker and JobKeeper will affect the ordinary Australian.
What do you see as the main benefit of keeping JobKeeper in place?
The reason that JobKeeper has been put in place is because the economy is not yet strong enough to operate without some form of government support. In the absence of JobKeeper, unemployment would skyrocket to be between 15-20% (it is currently at 7.4% but if you include people who are working zero hours and those that have been discouraged to look for a job and have left the labour market then the unemployment rate is just over 11%).
While the Australian economy has opened up considerably since the “stay at home” lockdown over the end of March and April, activity is not back to normal. Social distancing requirements and restrictions on interstate travel mean many businesses are operating well below their potential capacity and this will remain the case for some time.
What do you think will happen in December and March next year? Do you see major changes in the job market, particularly if there is still no tourism?
Employment growth should continue to recover as more parts of the economy continues to open up. But, growth in employment will remain low and it will take a while to offset all of the job losses that occurred over April and May. There was a big exodus of people out of the labour market over April and May (around 665K people) and as these people re-enter the labour market (to either becoming employed or to finding a job in which case they will be classified as unemployed) the labour force participation rate will rise which will put upward pressure on the unemployment rate.
We see the unemployment rate peaking at around 9% over the second half of this year. Without JobKeeper, it would be higher. While JobKeeper is scheduled to finish in March 2021, I suspect that the government would extend the program, if the economy required it.
What are the impacts of the changes to JobSeeker on ordinary families?
The JobSeeker Coroanvirus Supplement will be extended from 25 September to 31 December but at a reduced rate which means that the daily payment rate will drop from $80 to around $58 (but it depends on your personal situation, i.e. single, dependent children etc).
The rationale behind reducing the JobSeeker payment was similar to JobKeeper – that the economy would have opened up more which allows people to get back to their normal employment. The lower JobSeeker payment will most affect families who are not able to find employment.
There has been a lot of talk about Zombie firms. How can I tell, as an employee, if my company is one of these?
Zombie companies are those that are only operational because of current government support. Without this support, they would close. In terms of if you can tell whether you are employed by a zombie company, in reality, you probably can’t tell because the way that your business operates will depend on the future of the spread of COVID-19, which is a known unknown.
If COVID-19 gets more under control in Australia and more businesses can increase capacity again to lift cash flows, this will support business incomes. But the longer that it takes to get COVID-19 cases under control, the longer the hit to business cash flow, even with government support.
What do you think the effect will be on the government’s stance on JobKeeper and JobSeeker, if we go into further lockdowns?
The government could extend these programs for longer or they could increase the payment amounts. Or they could do something outside of JobKeeper and JobSeeker and provide targeted support for industries and regions who would be under lockdown, if there were localised lockdowns.
Do you think there is the threat of the September Cliff? And if so, how do you think it will pan out?
The fiscal cliff in September is now a fiscal slope. The lower rates of JobKeeper and JobSeeker will hurt some households whose income is still well below pre-coronavirus levels. But, the fact that these government programs have been extended is a big positive in reducing the fiscal cliff risks.