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Coronavirus

Australians fret over cuts to JobKeeper and JobSeeker COVID aid

'It's going to be worse than ever,' warns recipient as PM eyes deficit

A man walks on July 30 in Melbourne, where the new COVID-19 lockdown permits residents to leave home only for work, exercise and essential outings.   © Getty Images

SYDNEY -- David Bell, jobless with a wife and two teenagers, was just scraping by on government aid and assistance from a local food bank before the coronavirus hit Australia.

But a major expansion in benefits to help citizens cope with the pandemic's blow to the economy has proven a godsend for the 59-year old former police liaison officer, who volunteers at several charities in Sydney and has found his age an impediment to re-entering the workforce.

"I've finally been able to save money, I've never been able to do that," Bell said. "Just having that extra bit of money, we can do stuff we couldn't do before. What they have done is a blessing."

What the government did was essentially double the unemployment benefit overnight -- a huge boost for many who lost jobs due to the efforts to stop the spread of the coronavirus and others, like Bell, who had already faced difficulties. It also offered wage subsidies to help businesses keep employees on.

Now, however, the twin initiatives -- JobSeeker and JobKeeper -- are about to be scaled back, meaning that from September the overall benefit will only be slightly higher than the main pre-pandemic unemployment payment. Prime Minister Scott Morrison is seeking to make good on a previous vow to straighten out the nation's finances.

Bell says the impact of the cuts will be profound.

"It's going to take away people's livelihood," he said. "It's getting tough out there and when COVID-19 finishes, it's going to be worse than ever."

To be sure, Australia has weathered the pandemic in relatively better shape than other countries, thanks to its well-resourced health care system and coordinated response from federal and state governments. With a population of almost 25 million, the continental country has recorded over 15,000 infections and has one of the lowest case mortality rates in the world.

But despite its reputation as the land of the "fair go," Australia has one of the lowest unemployment benefits for newly jobless people among the Organization for Economic Cooperation and Development, or OECD, group of wealthy nations. Before the pandemic, the main welfare payment had not increased in real terms in over two decades.

"If anything COVID-19 has underscored the role of government as insurers," said Brendan Wood, household finances director at the Gratton Institute, a public policy think tank.

Faced with an unprecedented health and economic crisis, Morrison's center-right coalition government introduced a AU$70 billion ($50.4 billion) wage subsidy program -- JobKeeper -- to mitigate the economic fallout. It was the single largest fiscal measure in Australian history.

This came after Morrison triumphantly declared in December that the government had balanced its books, with a surplus AU$5 billion having been forecast for 2020. Now the country is facing budget deficits not seen since World War II: The figure hit AU$85.8 billion for the fiscal year ended June 30 and is expected to soar to AU$184.5 billion for 2020-21.

The JobKeeper initiative has been a lifeline for 3.5 million Australians. Under the program, businesses significantly affected by the pandemic can access a government subsidy of AU$1,500 every two weeks for each eligible employee. From the end of September, though, dispersals for full-time employees will be reduced to AU$1,200, and AU$650 for part-time employees. The unemployment benefit -- JobSeeker -- will be cut from AU$550 to AU$250.

The plan, announced last month, was meant to relieve worries about an "October cliff" after the programs were originally due to end in September. JobKeeper is now set to run until next March, while JobSeeker will be reviewed in December but could also run into next year.

Speaking on the changes, Morrison said the programs are not "do-nothing payments," after a government review found the boosted jobless benefit was acting as a disincentive for people to seek work. Some have leveled the same criticism at the massive relief effort underway in the U.S.

"They are payments that support people's incomes but also do not, and are not designed, to prevent them from going out and seeking work to improve their circumstances," Morrison said.

A sign at a Sydney park advises social distancing on July 29.   © Getty Images

Still, some economists and welfare groups say the measures might not ultimately prove strong enough to rescue the economy. And as the government overhauls the payments, they fear more people may be pushed into poverty.

The Gratton Institute's Wood, while welcoming the JobKeeper extension, says Australia's unemployment benefits are "grossly inadequate" and the JobSeeker reduction will leave a "glaring hole in the economy."

Gratton has called for a further AU$70 billion to AU$90 billion to be injected over the next two years, and that was before a second outbreak in the state of Victoria and its capital Melbourne sent residents back into lockdown. Wood believes greater stimulus measures are needed until the country returns to full employment.

"The government is not being ambitious enough with the economy," he said.

Diana Mousina, senior economist at AMP Capital, acknowledged that the budget deficit is "extremely huge right now" but added, "The programs have been very successful in maintaining a lower unemployment rate." For Mousina, what is needed above all else is a firm backstop. "If we didn't have these support measures, we would fall into an economic depression," she said.

She believes the government is being "very optimistic" when estimating that only 1.5 million Australians will be left on JobKeeper come December. "We don't know what the shape of the economy will be in six months," she said. "The outlook is very shaky."

A normally busy Melbourne shopping street is quiet in late July as local authorities attempt to stop a fresh wave of coronavirus infections.   © Reuters

Amy Stevenson, a sales representative for a popular Australian craft brewery, was furloughed in March, after lockdown restrictions left the hospitality sector on life support. She had only just relocated to Sydney.

Anxious and faced with the prospect of going months without pay, Stevenson considered moving in with her parents, who live over four hours from Sydney. Luckily, she was rehired under JobKeeper two months later.

"I remember getting my first JobKeeper payment, and seeing it was a doable and achievable amount to live off," she sad. "It definitely helped take away some of that stress."

Now, she hopes to soon return to full-time hours and that the business will not be so dependent on JobKeeper. But she also frets about the impact of Melbourne's second lockdown and potential spillover effects on the hospitality industry and overall economy.

"The most frustrating thing is that any planning the business was doing was on the assumption the country would open back up again," she said. "2020 has definitely not been a smooth year for anyone."

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