Australia is facing another economic downturn in October when the JobKeeper program and JobSeeker supplement end, economists have warned.
Six million Australians face losing $1,500 a week when the JobKeeper scheme ends on 27 September.
And 1.7million people on unemployment benefits stand to lose half their income when the coronavirus supplement providing an extra $275 a week runs out on 27 October.
The government expects there will be 1.7million people claiming JobSeeker in September. Pictured: Centrelink queues in March in Sydney
Six million Australians on the $1,500-a-fortnight JobKeeper wage face the prospect of possibly losing their jobs. Pictured: South Melbourne Market
Such a widespread reduction in incomes could cause a ‘big crunch’, according to ANU Professor Peter Whiteford.
‘There is every chance of a second economic downturn when these schemes end in October,’ he told Daily Mail Australia.
‘Many of the people newly on JobSeeker have mortgages or are paying rent on a place they could afford when they were in work.
‘So there could be large knock-on effects if half their income is withdrawn,’ he said.
Professor Whiteford proposes that the base level of the JobSeeker amount should be raised by $120 from $275 to $395 a week after the supplement runs out.
He calculated this is the amount needed to keep the unemployed from poverty, defined as earning less than half the median household income.
Professor Whiteford said this would cost taxpayers around $14billion a year if two million Australians were out of work – but would be more economical that continuing the supplement.
Professor Whiteford proposes that the base level of the JobSeeker amount should be raised by $120 from $275 to $395 a week after the supplement runs out. Pictured: Foot traffic in the Sydney CBD as lockdown restrictions are lifted
1.7million people on unemployment benefits stand to lose half their income when the coronavirus supplement runs out on 27 October. Pictured: Cyclists at Surfers’ Paradise in April
He believes the Green Party and Labor Party will back his proposal after a senate inquiry in April, dominated by Green and Labor senators, found ‘too many’ people on income support were living in poverty.
Prime Minister Scott Morrison, however, has so far insisted that changes to the JobSeeker allowance should not be permanent.
Meanwhile, ANU Professor Bruce Chapman, who designed Australia’s HECS scheme, is calling for a loan scheme to replace the JobKeeper payment.
He believes that thousands of Australians stand to lose their jobs without it.
‘For many organisations, without a buffer of this type, the withdrawal of JobKeeper could be very harsh, and might mean increased job shedding, further demand reductions, and heightened uncertainty at a time when insecurity is already at a historic high,’ he said.
The scheme would allow businesses and individuals to get a government loan but only pay it back when they are making enough money.
He said for individuals ‘this could be a loan of $5,000, enough to tide people over until their fraught employment situation becomes clearer.
‘Repayments would be based on personal income and designed to minimise non-repayments of the debt,’ he said.
Professor Chapman said income and revenue-based loans would also be the fairest and most sensible form of economic stimulus at a government’s disposal.
The government is reviewing the JobKeeper scheme in June.
ANU Professor Bruce Chapman, who designed Australia’s HECS scheme, is calling for a loan scheme to replace the JobKeeper payment in September. Pictured: Melbourne residents walk in Albert Park
A woman wearing a hand made facemask enjoys the freedom of legally sitting on a park bench to read a book at the Botanical Gardens in Melbourne
Last week Treasurer Josh Frydenberg warned Australia faces a bleak economic future with unemployment hitting 10 per cent in June.
A total of 1.4million Australians will be out of work after coronavirus lockdowns forced whole industries to shut down.
The unemployment figure has not been in the double digits since 26 years ago in April 1994.
Australia has only had double-digit unemployment during the 1930s Great Depression, the early 1980s and early 1990s.
The treasury estimates that gross domestic product will drop by more than 10 per cent in the June quarter, the country’s biggest fall ever.
The $50billion loss is equivalent to the total quarterly production of South Australia, Tasmania, the Northern Territory and the ACT.
Treasurer Josh Frydenberg (pictured on 12 May) has warned Australia faces a bleak economic future with unemployment hitting 10 per cent in June