JobKeeper will be extended until March and an increased JobSeeker rate will last until December – but both will be reduced from September.
The Prime Minister today announced the coronavirus support payments, which have helped 5.1million Australians, will be reduced as the economy recovers from coronavirus lockdowns.
JobKeeper will be reduced from $1,500 to $1,200 from 27 September, with a lower payment of $750-a-fortnight for people who worked less than 20 hours a week in February, before coronavirus.
The JobSeeker supplement will be reduced from $550 to $250, meaning the payment will be worth $800-a-fortnight instead of $1,100 in total.
But JobSeekers will be able to earn $300 while keeping their full benefits.
Fewer businesses will be eligible for the JobKeeper payment with a tougher qualification test measuring turnover decline.
The government wants businesses to pay a greater share of employees’ wages as economic conditions improve.
The JobKeeper payment will be extended until March and an increased JobSeeker rate will last until December. Pictured: The Prime Minister meeting businessmen on Monday
As Melbourne approaches its third week of lockdown, residents are forced to wear masks
What are the downsides of support payments?
Hugely costly for taxpayers
Less incentive for casuals to take on extra hours
Less incentive for stood-down employees to find extra work
Harder for re-opening businesses to hire staff
Stop people moving from shrinking sectors into growing sectors
JobKeeper – a $1,500 a fortnight wage subsidy which has supported around 3.5 million Australians and 960,000 businesses – will remain in place until September 27.
After that, there will be two payment tiers based on hours worked to more closely reflect pre-pandemic part-time and full-time incomes.
JobKeeper will end in March 2021.
The JobSeeker unemployment benefit, which was boosted from $560 to $1100 a fortnight, will also be scaled back, but won’t return to its old level.
The ongoing dole rate after March 2021 will be determined in the October federal budget.
Mr Frydenberg insisted support will continue for those in need when eligibility across both payments are tightened.
‘JobKeeper has been an economic lifeline to millions of Australians and that lifeline will be extended for those businesses that need it most,’ he said.
Labor leader Anthony Albanese said he was concerned that JobKeeper’s flat rate led to 875,000 workers being paid more than before the crisis.
‘It’s good that the government has finally woken up to some of the waste in this scheme,’ he told ABC radio.
Greens leader Adam Bandt said Labor had taken the ‘wrong approach’ and ‘should be pushing the Liberal Party to keep a living income, not attacking low income earners.’
The federal opposition wants the dole set higher than the old rate but not above the age pension, which is $860 a fortnight.
Treasury’s review suggests the enhanced JobSeeker payment may be affecting incentives to work.
Mr Albanese rejected the idea the higher rate could encourage people to avoid employment, saying there were 13 people out of work for every job vacancy.
Victoria has recorded 375 new cases on Tuesday as New South Wales teeters on the brink of a major outbreak that may lead to tighter restrictions
There is speculation that pubs and restaurants in NSW could be forced to shut their doors again if the state’s coronavirus infections continue to rise
‘I don’t think this is the time for the government to essentially be running out the ‘dole bludger’ argument which is so dear to the heart of conservative governments,’ he said.
Cutting back both support measures will ease pressure on the federal budget.
The government will update the state of the nation’s books on Thursday, revealing a budget deficit in the order of $200 billion.
As of July 15, JobKeeper payments totalled $29.8 billion.
Under the existing scheme, companies turning over less than $1 billion with a 30 per cent fall in revenue are eligible.
Firms turning over more than $1 billion must show a 50 per cent decline.
Businesses that met the revenue test at any stage during the pandemic qualified for the payments for each employee.
The JobKeeper scheme had disproportionately benefited teenagers, with their wages soaring by an average of 16.8 per cent in the seven weeks to early May.
Every other age group saw their pay levels plunge by 5.4 per cent.
Outgoing Finance Minister Mathias Cormann said a pared back JobKeeper would address those kind of flaws.
‘What the review also found was that there were a number of features of JobKeeper that created adverse incentives which may become more pronounced over time as the economy recovers,’ he said.
‘This formed part of our considerations as we looked at the next phase of the JobKeeper program.’
Treasury advisers were worried about JobKeeper propping up firms that would otherwise have closed.
Treasurer Josh Frydenberg has also hinted the wage subsidy program will run until March 2021, with his home city of Melbourne in lockdown. Pictured is the Bourke Street Mall
JobKeeper is being extended beyond the end of September because the government is worried about businesses potentially collapsing if it’s withdrawn too soon. Pictured is a barista in Sydney on July 1
Unemployment during June amid COVID-19
Australia’s unemployment rate climbed from a 19-year high of 7.1 per cent in May to 7.4 per cent in June – the highest since November 1998
Number without work climbed from 923,000 to a record-high 992,300
Close to a million people unemployed for the first time ever – surpassing 960,200 record set in December 1992
Unemployment increased even though 210,800 more people were employed as COVID-19 shutdowns eased
That was because the participation rate increased from 62.7 per cent to 64 per cent as more people looked for work
Source: Australian Bureau of Statistics labour force data for June
‘It distorts wage relativities between lower and higher paid jobs, it dampens incentives to work, it hampers labour mobility and the reallocation of workers to more productive roles, and it keeps businesses afloat that would not be viable without ongoing support,’ the Treasury review said.
The review, finalised at the end of June, found JobKeeper had helped businesses that had suffered an average turnover decline of 37 per cent in April 2020, compared with the same month in 2019, and staved off closures.
As of May more than 1.6million Australians were receiving JobSeeker, which combines the old Newstart unemployment benefit along with sickness and bereavement payments.
Last month close to one million people, or 992,300 Australians, were officially unemployed for the first time ever, as the jobless rate rose to 7.4 per cent, the highest level since November 1998.
The JobKeeper package, costed at $70billion, was announced on March 30, a week after JobSeeker was effectively doubled with a temporary $550 a fortnight coronavirus supplement.
The doubling of the dole ends on September 24, which could see JobSeeker either revert back to its original $565.70 figure, from $1,115.70, or be permanently raised from its base rate.
Treasury said any dole increase would have to be balanced with encouraging the unemployed to get a job.
‘In addition, the introduction of enhanced income support under JobSeeker may also be affecting incentives to work,’ it said.
Existing JobKeeper and JobSeeker payments are continuing until the end of September, as legislated, and both schemes are being extended.
The Melbourne lockdowns, expected to last six weeks, are estimated to be costing the Victorian economy $1billion a week, in a city that makes up a quarter of Australia’s economic activity.
Treasury is releasing a full economic statement on Thursday as a prelude to the October budget, delayed because of coronavirus.
The government is also making an announcement about the doubling of JobSeeker unemployment benefits, which end on September 24. Pictured is a Centrelink queue at Darlinghurst in Sydney’s inner east