JobSeeker decision due in early December

Posted on 29 October 2020
JobSeeker decision due in early December

Rebecca Gredley
(Australian Associated Press)

A decision on the rate of JobSeeker is expected to be made by early December, with the government hinting elevated levels will continue.

Unemployment Australians are receiving $250 more a fortnight than usual with the coronavirus supplement.

Social Services Minister Anne Ruston said a decision would be made based on economic conditions.

"If the evidence supports the continuation of elevated levels of support, they will be made available to Australians who need them," she told a Senate estimates hearing on Wednesday

"I think the prime minister made it very clear and provided certainty to Australians that on the 1st of January there is very likely to be continued elevated levels of support, recognising that we still are in a pandemic and we still don't know when this pandemic is going to end."

Prime Minister Scott Morrison on Tuesday gave his strongest indication yet the coronavirus supplement could be extended into next year.

"I have been clear and leant into it pretty heavily that people can expect the COVID supplement to be going forward beyond the end of this year," he told parliament.

"The precise level and the arrangements that sit around that are matters the government is considering now and will be doing so over the next few weeks."

The $250 a fortnight coronavirus supplement shrunk from $550 at the height of the pandemic.

The boost is due to end in December and the government would have to legislate a further extension.

Mr Morrison said a decision would be made before parliament rises for the year on December 10 so it can be stamped into law.

Without the coronavirus supplement, the dole payment would return to its pre-pandemic rate of $40 a day.

"Living without a job would be extremely difficult for any Australian," Senator Ruston conceded.


Australia's triple-A ratings safe for now

Posted on 19 October 2020
Australia's triple-A ratings safe for now

Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)

Australia's huge budget deficit and government debt topping $1 trillion for the first time doesn't seem to be troubling the world's major credit rating agencies, at least at this stage.

Treasurer Josh Frydenberg handed down a big-spending budget that forecasts a deficit of $213.7 billion in 2020/21, dwarfing the previous record of $85.3 billion in the last financial year.

It will see gross government debt reaching $1 trillion in 2021/22.

Australia is one of very few countries in the world to hold the top-tier triple-A rating from all three key credit rating agencies Standard & Poor's, Moody's Investors Service and Fitch Ratings.

Standard & Poor's saw no immediate threat to Australia's triple-A rating one of only 11 countries to hold its top-tier level.

"The budget confirms that the COVID-19 pandemic and stimulus packages will weigh on fiscal outcomes for years to come, with fiscal 2021 taking the brunt of the hit," S&P global ratings director Anthony Walker said.

"While debt is markedly higher than the past, servicing costs remain manageable, as the interest-rate environment will remain favourable for a number of years."

However, Australia retains a negative outlook reflecting its substantial fiscal deterioration given its rating, and risks remain tilted to the downside.

"We expect fiscal deficits to narrow from fiscal 2022 onwards, even with proposed tax reforms and new expenditure measures announced," Mr Walker said.

"Should this scenario not pan out as we expect, downward pressure on the rating may intensify."

Moody's Investors Service also noted the significant increase in Australia's debt levels to come, saying it was consistent with the nation's triple-A rating "at this point".

"Its experience with fiscal repair following past shocks and the likelihood of an extended period of low servicing costs mean that its debt remains manageable," Moody's vice president Martin Petch said in a statement.

The key risk was whether Australia would be able to meet the growth forecasts, including the forecast expansion in 2021/22.

The budget papers predict an economic growth rate of 4.75 per cent in the next financial year after a 1.5 per cent contraction in 2020/21.

Like S&P, Fitch also revised Australia's outlook to negative earlier this year to reflect the impact of the pandemic shock on the economy and public finances.

"Australia came into the coronavirus shock with fiscal space to counter the effects of the pandemic in the near term," Fitch said in a statement.

It says while the budget deficits are wider and debt is higher than previously anticipated, the medium-term debt trajectory is in line with its expectations.

"From a rating perspective, the medium-term debt trajectory is key," it says.

"Our future rating assessments will also assess the relative deterioration of Australia's fiscal position to its 'AAA' peers, whom are all seeing higher debt-to-GDP ratios."

Posted in: News  

Some firms call it a day as reality bites

Posted on 15 October 2020
Some firms call it a day as reality bites

Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)

There are signs that some Australian businesses that have been propped up by government support measures during the coronavirus pandemic are calling it a day.

New figures show the number of businesses entering into administration rose 11 per cent in September, the first increase since June.

At the same time, the number of business defaults also saw the first increase since May, up by 23 per cent, according to digital credit reporting agency, CreditorWatch.

CreditorWatch CEO Patrick Coghlan said the figures suggest that some of the so-called 'zombie' businesses that have been reliant on government support for survival are waking up to the reality of their situation and shutting up shop.

"The long term-trend is that zombie companies will continue to survive on government support and so the next six months are crucial in determining what position we start our economic recovery from.," he said.

"What we don't want to see is businesses that are doomed to fail continuing to operate and taking healthy companies down with them."

Victoria recorded a 23.8 per cent increase in business administrations in September, following a 49.3 per cent decrease the previous month.

Queensland also recorded a 24.1 per cent rise in business administrations last month, following a drop of 25.4 per cent in August.

However, NSW recorded a further 1.6 per cent decrease in September, building on the 34.3 per cent fall in August.

Posted in: News  

RBA expects jobless rate to rise again

Posted on 24 September 2020
RBA expects jobless rate to rise again

Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)

The Reserve Bank has warned the unemployment rate could still rise despite a recent unexpected fall, while presenting four policy options the central bank has available should the economy need a further lift.

Deputy central bank governor Guy Debelle says while the fall in the unemployment rate to 6.8 per cent in August was unforeseen, the recovery in the labour market was likely to be "bumpy and uneven".

"We still expect the unemployment rate to rise from here," he told the Australian Industry Group on Tuesday.

His comments came as new data on Tuesday showed payroll jobs fell 0.7 per cent for the month ending September 5.

The Australian Bureau of Statistics said over this period jobs fell by 2.1 per cent in locked-down Victoria and by 0.2 per cent over the rest of the economy.

Payroll jobs remain around 4.5 per cent lower than mid-March and at the start of the pandemic 8.3 per cent down in Victoria and 3.1 per cent in the rest of Australia.

Even so, Mr Debelle said the economy had come off a trough seen in May, at the height of the coronavirus pandemic.

"So it is plausible that the worst is behind us but the recovery from here is potentially more of a slow grind," he said.

But he again said interest rates are unlikely to rise over the next three years, and presented four options that are at the Reserve Bank's disposal should the economy need a further lift.

These are extending its bond buying program to longer maturing issues, foreign exchange intervention and negative interest rates.

Another option is to the lower the current structure of interest rates in the economy, both in terms of the target for government bond yields and the borrowing rate the RBA offers to banks from the current 0.25 per cent.

"It is possible to further reduce these interest rates," he said in his speech.

But he emphasised these were all just options.

"I am not saying anything new on the likelihood of any of those," he said in a subsequent Q&A session.

There has been speculation the central bank could ease the cash rate from its already record low of 0.25 per cent to 0.10 per cent.

Interest rate futures imply a 0.10 per cent cash rate by the end of the year.

RBC Capital Markets head of strategy Su-Lin Ong has long argued negative rates should be an option in the Reserve Bank's toolkit.

"By continuing to highlight other policy measures without committing to any timelines, especially ahead of the upcoming 2020/21 Commonwealth Budget, the RBA is employing maximum flexibility," she said.

"In these uncertain times, that would appear prudent."

Meanwhile, consumer confidence has risen for a third straight week, with Victorians notably more upbeat that the coronavirus outbreak in the state is being brought under control.

The ANZ-Morgan consumer confidence index a pointer to future retail spending rose 1.2 per cent and to its highest level in three months.

ANZ head of Australian economic David Plank said there was an improvement in confidence in Melbourne and the rest of Victoria.

"The success in getting the COVID-19 new case numbers down is clearly having a big impact on confidence in Victoria," he said.

Melbourne consumers are now a touch more confident than those in Sydney.

Posted in: News  

Cutting JobSeeker could cost 145,000 jobs

Posted on 21 September 2020
Cutting JobSeeker could cost 145,000 jobs

Daniel McCulloch
(Australian Associated Press)

At least 145,000 jobs could be lost if pandemic-boosted welfare payments are slashed as planned.

Mental health experts also fear the looming reduction could have significant psychological impacts.

JobSeeker unemployment benefits have been temporarily doubled since April, but will be cut by $300 a fortnight at the end of next week.

The payment is due to go back to the original Newstart allowance of $40 a day in December, unless the government changes its policy.

Analysis by Deloitte Access Economics commissioned by the Australian Council of Social Service has found cuts to coronavirus supplements for welfare recipients will cost the economy $31 billion.

The report also contends 145,000 full-time jobs are at risk over the next two years if JobSeeker is cut.

Deloitte Access Economics partner Nicki Hutley said every dollar the government invested in JobSeeker generated a significant economic return.

"Providing people without paid work with enough to get by is highly effective economic stimulus, as they have little choice but to spend straight away on essentials," she said.

"People on higher incomes have the option of saving, which many are doing right now given the uncertainty of the pandemic.

"This is why other measures, such as income tax cuts, would not be as effective in getting us out of this recession."

ACOSS CEO Cassandra Goldie urged the government to extend the existing coronavirus supplement and legislate a permanent JobSeeker rate that allowed people to cover basic living costs.

"There are a lot of things that are not in our control in this pandemic," she said.

"But one thing that the government does have control over is ensuring that everyone has enough to cover the basics of life, including a safe place to live."

Community Mental Health Australia chief executive Bill Gye has warned federal politicians winding back coronavirus supplements will have a big impact.

"The reduction of JobSeeker will have a really significant negative impact on the mental health of Australians," he told a parliamentary committee on Tuesday.

ACOSS wants the permanent base rate of JobKeeper increased by between $185 and $275 a week.

Prime Minister Scott Morrison has signalled he has no intention of going back to the original Newstart rate of $40 a day, but has given no indication of how much the payment will be beyond the end of the year.

Posted in: News  
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