Prime Minister Scott Morrison insists COVID-19 welfare payments must be wound down, even as multiple reports warn that withdrawing the supports will wipe billions of dollars in spending from the economy.
The prime minister says pandemic-boosted JobSeeker unemployment benefits and JobKeeper wage subsidies cannot continue indefinitely.
“These things can’t go off into the never never and they have to be wound down,” he said on Sept 17.
“We have to move on from them.”
A new report by the McKell Institute has found planned cuts to JobKeeper subsidies will wipe almost $10 billion from the economy before Christmas.
The institute found 1.05 million part-time workers would have their $1500 fortnightly JobKeeper payments reduced to $750 from Sept. 29.
Another 2.4 million full-time workers would have their payments cut to $1200.
The institute found the Commonwealth would be spending $1.52 billion less on JobKeeper per fortnight than if the original rate remained, representing a $9.9 billion reduction in fiscal support by Christmas.
The OECD released a separate report on Thursday warning against “premature budgetary tightening” when economies are still fragile.
Shadow treasurer Jim Chalmers said it was too soon to wind back coronavirus supports.
“During the deepest recession in almost a century and an escalating jobs crisis, it makes no sense for the Morrison government to be withdrawing support from the economy without a comprehensive jobs plan to replace it,” he told AAP.
“Scott Morrison should reconsider his cuts to JobKeeper which are coming at the worst possible time for many workers, businesses and communities who are relying on it.”
Australia’s unemployment rate is expected to rise to 7.7 percent on Sept. 17 when the latest jobless figures are released.
But despite more than one million people looking for work, the Morrison government also plans to slash pandemic-boosted JobSeeker benefits by $300 at the end of next week.
The payment is then due to go back to the original Newstart allowance of $40 a day in December, unless the government changes its policy.
Deloitte Access Economics analysis commissioned by the Australian Council of Social Service has found cuts to JobSeeker top-up payments will cost the economy $31 billion.
Deloitte also found 145,000 full-time jobs could be lost over the next two years if JobSeeker is cut, fuelled by a plunge in consumer spending.
By Daniel McCulloch