Yahoo Finance 'Severe' risk coming to Australia: OECD
Australia’s economic growth is predicted to fall a whopping 6.3 per cent if there’s a second wave of coronavirus, and 5 per cent if there isn’t, new data from the Organisation for Economic Cooperation and Development (OECD) revealed.
But even with a major fall, the OECD’s economic outlook found Australia would still be one of the major world leaders in recovery, behind Korea, China, Indonesia and Costa Rica.
The OECD, however, puts one major caveat on this: income support measures like JobKeeper and the JobSeeker bonus will need to be extended.
“Australia’s ample fiscal space permits a strong response to a second outbreak or if the recovery falters,” the OECD report stated.
“In particular, some income support measures may need to be extended beyond their September expiry date.”
The OECD also stated the government could further promote reskilling and upskilling through adult education and enhance job search programmes.
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And, expanded loan guarantees, coupled with accelerated insolvency processes could reduce scarring for entrepreneurs and facilitate a dynamic recovery, according to the OECD.
“The authorities should also ensure that the social safety net is adequate and consider further investment in energy efficiency improvements and social housing.”
The OECD isn’t the first institution to flag that extended income support measures might be necessary.
In May, the Reserve Bank of Australia governor Philip Lowe told the Senate Select Committee on Covid-19 that the Australian economy would hit a “critical point” when stimulus measures end in September, and warned against withdrawing them if the workforce still required them.
"It's clearly going to be a critical point when that scheme [JobKeeper] comes to an end and also when the deferral for six months of mortgage payments and other payments that the banks are offering … so that's a critical point for the economy," Lowe said.
“If we have not come out of the current trough in economic activity, there will be, and there should be, a debate about how the JobKeeper program transitions into something else, whether it's extended for specific industries, or somehow tapered.”
The government’s stance on JobKeeper extensions
The government has not confirmed what it intends to do with JobKeeper, and whether it plans to even keep it around for the entirety of the six months it was initially touted to last for.
In a May address to the National Press Club, Prime Minister Scott Morrison said while the stimulus did its job in supporting the economy, it could only be temporary.
“Now it is true that in the short term, demand stimulus by Government can boost your economy. And that is why we have supported this as an emergency response, but it can only be temporary,” he said.
“At some point you’ve got to get your economy out of ICU. You’ve got to get it off the medication before it becomes too accustomed to it.”
And in a press conference earlier that month, Morrison couldn’t provide any certainty on the length of the stimulus.
“I can give them the certainty that I want them to be back in their jobs, where they don't need it [JobKeeper or JobSeeker],” Morrison said.
There has been some speculation that JobKeeper would remain for some sectors, like tourism, and be cut for others.
For example, 120,000 childcare staff will no longer receive the $1,500 fortnightly wage subsidy from 20 July, which sparked some talk that other sectors could be cut early too.
"There may well be some further adjustments made at the edges in the context of the economic statement of 23 July," Finance Minister Mathias Cormann told a Senate Committee on Tuesday.
However, Cormann said no decisions had been made about other sectors yet.
Almost $13 billion in JobKeeper payments have flowed to 3.3 million workers since the beginning of the scheme.
Will the increase in JobSeeker be extended?
The doubling of the JobSeeker payment has been something of a lifeline for unemployed Australians, who are finally able to afford basic necessities without breaking the bank.
In April, the government was told to sustain the increase to ensure all eligible recipients don’t live in poverty by the Senate Community Affairs References Committee.
“Significantly, the committee found that the income support system is not meeting its objective of ensuring a minimum standard of living for working-age jobseekers, as too many live in poverty,” the review stated.
“The committee recommends that once the Coronavirus Supplement is phased out, the Australian Government increase the JobSeeker Payment, Youth Allowance and Parenting Payment rates to ensure that all eligible recipients do not live in poverty,” the Senate recommended.
But the government has previously stated its intention to also revert the income support payment back to its pre-coronavirus level.
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