Economists have labelled yesterdayโs economic update by Treasurer Josh Frydenberg and Finance Minister Mathias Cormann โconfusingโ, saying the economic stimulus of the increased JobSeeker and JobKeeper payments had been successful in propping up the economy. As such, reducing the payments made โno economic senseโ as unemployment was expected to continue rising until at least Christmas.
Modelling from the Australia Institute indicates the $300 per fortnight cut to the JobSeeker payment will put 370,000 people back into poverty including 80,000 children.
Australia Institute economist Matt Grudnoff said unemployment benefits had been chronically and horribly low for so long and the payment was impossible to live on.
โPeople are still in a recession and children could be stuck with the effects of poverty and the damage to their health for the rest of their lives.โ
Australia Institute Chief Economist, Richard Denniss, said it was โcontradictoryโ to hear the government praise its own stimulus spending, while announcing cuts to the successful program.
โWhy do we have to be brutally cruel to the poorest people in Australia?
โThe governmentโs economic argument is incentive; we have to be cruel to be kind.
โEmployment increased by 200,000 people who found jobs in June, thatโs the largest ever monthly increase in jobs, and the supplement did not stop it.โ
Mr Denniss said unemployment is going to stay at โhorribly high levelsโ because of a shortage in demand.
He said of the four elements that made up gross domestic product (GDP), only government spending was stimulating the economy, with consumer spending, private spending and exports all affected by the pandemic.
โItโs silly to withdraw stimulus,โ he said. โItโs the only thing propping up GDP, yet theyโve promised to cut it; theyโve promised to cut GDP.โ
Mr Denniss said unemployment will continue to go up and the government still didnโt have a plan to create jobs.
โWhat is the plan to create jobs for the 1.6 million people on benefits?
โWhether itโs a new green deal, a brown deal or an old deal, what is the deal?
โWeโre in the middle of a long-term economic crisis.โ
Mr Grudnoff said the Reserve Bank told the government not to worry about debt at all because stimulating the economy was more important.
โThis recession is different to every other recession where the government would encourage people to go out and spend money,โ he said.
โWe canโt do that now; we have to be a bit smarter about it.
โThe JobSeeker and JobKeeper payments protect those we canโt stimulate at this point.โ
Mr Denniss said there was no economic theory that proved government debt was bad economics.
โWe have to be smart about what sort of stimulus we go for,โ he said.
โOften the money should go to state and local governments.
โStimulus should be local, targeted, and have secondary benefits.
โWe should think how to get best bang for our buck.โ
