The government’s new generosity toward those out of work is a hoax

By Joe Montero

Praise over the Morrison government’s generosity with JobSeeker and JobKeeker is misplaced and premature.

Enough has been said to reveal the pattern of what can be expected. Here are some quick observations spelling out the barely hidden truth. A more detailed response will come in due course.

This is what we were told onthe eve of the 21 July economic statement, when more is to be revealed.

Although both payment are to continue as they are, at least till September, the hurt is in the detail.

The current JobSeeker payments of $1,100 per fortnight will only continue for some. Those on unemployment before the lockdown, will go back to trying to live on $40 a day. This has been politely called ‘tailoring’. In reality, it’s a cut in JobSeeker through the backdoor.

Same story for JobKeeper. This is to be targeted more carefully. Read: Fewer businesses will be covered. Although the prime minister has said those that don’t really need it won’t get it, and those struggling to cope will, what this means hasn’t been defined.

We have seen that some of the biggest businesses have the resources and incentive to manipulate the system. They can reduce the size of operations and profit from the subsidy. It’s all about the ratio between the loss of revenue from the scaling down and the saving in labour costs, within the context of a sluggish market.

Small players don’t operate on a scale large enough to benefit from this advantage. This is a big reason why the biggest companies have been taking the lion’s share of JobKeeper. The scam has not been ruled out and is likely to continue unchecked.

The bottom line, is that fewer of the workers missing out on wages are going to get the JobKeeper payment.

Small and medium sized businesses will continue to be given access to cheap loans, through the arrangement already made with the banks. The maximum has been raised from $250,000 to $1 Million. The biggest change, however, is that instead of being provided to keep current operations going, they loans will be tailored towards new investments.

How this is going to help small and medium businesses to keep on going in the difficult situation they find themselves, hasn’t been explained. Those struggling day to day to survive are not going to undertake new ventures. It doesn’t add up, unless the money is really going somewhere else.

The most likely purpose, is to encourage greater automation and provide fewer jobs. This is called increasing the capital intensity of operations. and it is taking place at a time when there is already not enough work for all.

Genuinely struggling business is going to saddle up with new debt. If they don’t have the revenue coming for when payments on the loan are due, the prospect is closing their doors for good.

The idea that business will suddenly spring back to where it was before and expand is wrong. In the best of conditions, recovery will take time.

The assistance promised to small and medium businesses is largely a mirage. And the generosity towards recipients of Jobseeker and JobKeeper is the phasing out of payments, made to look like a gift.

New economic modelling by the Australia Institute shows that a return to $40 a day will put at least 4.5 million Australians into serious poverty.

The direction being taken by the government only makes sense, when the real underlying policy is to deliberately create a bigger pool of unemployed, as a source of cheap labour forced to work for less, to be used to pull down wage rates of those who do have work.

This is not what Australia needs.

Ben Oquist, executive director of the Australia Institute said: ‘

“This will not only have serious negative social effects for decades to come but makes terrible economic policy by effectively withdrawing much-needed stimulus.”

This is why there are calls to at the minimum keep the JobSeeker and JobKeeper at the present level permanently.

It is an indispensable part of coping with the pandemic, as well as rejigging and rebuilding an economy that puts people first, after it is over.

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