Economic doomsayers are predicting dire economic outcomes as reductions to assistance packages reveal the impact of COVID-19 on Australian jobs and businesses.
And many believe older Australians will be among those hit hardest.
From 25 September, the JobSeeker maximum fortnightly rate for a single household will drop from $1110 to $810, while JobKeeper will be reduced to a maximum of $600 a week from 28 September.
This comes despite Victoria, in particular Melbourne, still experiencing extremely restrictive lockdowns.
It is estimated that 900,000 businesses and more than 3.5 million workers have been supported by the JobKeeper program. The JobSeeker coronavirus supplement doubled many fortnightly unemployment payments.
Commentator Tarric Brooker told news.com.au that the changes will force hundreds of thousands of businesses to “stand on their own two feet for the first time in six months”. He says approximately 1.3 million workers will lose access to support from the JobKeeper program.
Mr Brooker quotes analysis of business confidence undertaken by consulting firm Taylor Fry and research firm Digital Finance Analytics (DFA) to conclude that the potential closure of small to medium-sized businesses could be a “devastating blow to an already struggling economy” and “the situation for the economy may be more dire than the current consensus suggests”.
Then there are loan deferrals. Hundreds of thousands of mortgage customers and 100,000 small business loan-holders are due to be contacted by banks to recommence repayments.
“The missed payments need to be made up, and the extra interest is added on top. Of course, not everyone will be able to do so. People have lost their jobs. Australia’s unemployment rate is 7.5 per cent and rising. The total amount of wages paid is down by 5 per cent,” writes economist Jason Murphy.
He believes the knock-on effect of this process could be devastating.
“Yes, banks will give some people extra time to find a new job. But not everyone. People will, in some cases, be forced to make the horrible decision to sell their homes to repay the loans,” Mr Murphy writes.
He says as the ‘tidal wave’ of loan deferral phone calls begins, all of us will be affected by the reduction in retail spending and possible forced sales of houses to repay mortgages. He quotes Commonwealth Bank predictions of a 10 per cent fall in Melbourne house prices and a six per cent national fall.
None of this is good news for older Australians.
At the outset of the pandemic in March, Australians aged between 45 and 65 made up about half of all unemployment support recipients. This had risen by nearly 25 per cent over the past six years.
National Seniors Australia chief advocate Ian Henschke was calling for a lift in the Jobseeker Payment.
“Older Australians struggle to find a job, struggle to make ends meet,” he said.
Judy Higgins, general manager of recruitment agency Olderworkers.com, says the JobSeeker payment for the mature unemployed person was ‘diabolical’.
In June, the Brotherhood of St Laurence published a report that stated up to 30 per cent of the newly unemployed or underemployed – nearly 400,000 Australians – were aged between 51 and 65.
The Australia Institute senior economist Matt Grudnoff told YourLifeChoices that retirees had not seen any advantage from lower childcare and petrol costs because they were staying at home and travelling less.
The impact of the pandemic on older women has been especially troubling.
“It is not only particularly dangerous to the health of older women, it has also increased their social isolation and exacerbated their precarious financial position, Augustine Zycher wrote for ProBono Australia.
“Indeed, if you are a woman over 50 in Australia and have no financial security, your prospects are increasingly grim. You may well face long-term unemployment, impoverishment and even homelessness.
“For those women who are already retired, the pandemic has increased the numbers who will age into poverty and homelessness. Older women who are desperate enough to withdraw their super during COVID-19 will be left totally vulnerable. Unlike young people, there is no chance of them ever replacing their super. As it is, women retire with around 47 per cent less super than men, if they have any super at all.”
However, some commentators are finding silver linings from the pandemic.
John Edwards, senior fellow at the Lowy Institute, says despite Victoria’s second wave of infection, Australia’s economic recovery from the coronavirus is underway.
“Though formidable, the fiscal challenge is well within Australia’s means … Australia is emerging from the pandemic sooner and at less economic cost than widely expected.
“Reckoning total COVID-19 fatalities compared to population at less than one thirtieth of the US or the UK rate, the handling of the crisis by Australian governments, hospitals, healthcare workers, and public officials has been more successful than in some comparable countries. So, too, the economic response has been swift, well targeted, and substantial.
“The International Monetary Fund (IMF) expects Australia’s economy to do much better than most advanced economies.”
Employment figures have also been better than expected. Official figures released in mid-September more than 100,000 new jobs were created in Australia in August. The official unemployment rate fell to 6.8 per cent, down from 7.5 per cent in July.
Sue-Lin Ong, chief economist at RBC Capital Markets told ABC News: “Outside of Victoria, there’s clearly some recovery going on in the broader labour market.”
ABC commentator Gareth Hutchens believes weak wage growth is the biggest challenge facing the economy, because Australians are reluctant to spend when uncertain, which hurts the retail sector.
“Growth in real household disposable income has averaged 3.1 per cent since 2007, but between 2016 and 2019 it averaged just 1.4 per cent.
“That occurred because there was a slowdown in both income growth and non-labour income growth – things like social security and rental income.
“Money for non-essentials has become so tight, any unexpected or unplanned expense could throw out entire household budgets. And at the same time, taxes were increasing.
“The ratio of tax paid as a share of gross income was 11.8 per cent in mid-2010, but it climbed to 15 per cent by the end of 2019.”
He says tax cuts won’t fully address systemic issues in the economy and the issue of weak wages growth existed long before the pandemic and bushfires.
“The ‘coronacession’ has put a spotlight on the structural problems in the economy that tax cuts alone won’t address. Tax cuts are no substitute for strong wage growth. Consumers are likelier to spend more when their wages are growing strongly.”
ABC business editor Ian Verrender even says there have been economic benefits to pandemic shutdowns.
He says iron ore shortfalls have been filled by Australian miners Rio Tinto, Fortescue, and BHP, which have gone into overdrive, shipping record quantities.
“Exports to China are up more than 8 per cent compared a year ago and in the financial year to June 30, the commodity cracked the $100 billion export mark, up from the previous year’s record $77.5 billion.”
Mr Verrender argues against the notion that harsh measures like lockdowns punish the economy for generations to come.
“When intensive care and emergency units are overloaded, people with medical conditions other than COVID-19 suffer and die, productivity plummets and confidence dives.
He cites a recent study by global management group McKinsey that reminds us it is not lockdowns that have caused the recession, it’s the pandemic.
“Ending lockdowns alone won’t restore confidence or growth,” the study says.
“Only when the novel coronavirus is under control will economic growth resume.”
The study found only a weak link between lockdowns and economic damage.
“Sweden, which had a lax approach during the first round of the virus, performed only mildly better than New Zealand’s economy, which pursued the toughest strategy of any nation,” Mr Verrender points out.
He says Victoria’s extreme lockdown measures will delay national economic recovery by as much as a year.
But had the harsh measures not been implemented, it would only have been a question of time before a national disaster.
He says Australians are saving “like never before – almost 20 per cent of income is being socked away”.
“That’s not an altogether bad thing for a nation vying for gold in the global household indebtedness stakes.
“But all that saving means Australians aren’t spending. And that’s bad for business and, ultimately, employment.”
He supports the study’s argument that nations pursuing more stringent lockdowns are more likely to perform better over the longer term.
“Nations pursuing a balancing act – trying to live with what they deem to be an acceptable level of infection – will struggle to rebuild confidence when compared to those opting for a near zero infection level, similar to our strategy.
“That’s because they are more likely to experience outbreaks.”
McKinsey estimates for every three months’ delay in getting the virus under control across OECD countries, the recovery in GDP to pre-crisis levels could be delayed by as much as six months.
“It’s what economists call opportunity cost. The cost of doing nothing, or not enough,” Mr Verrender writes.
“Killing the virus comes at enormous cost – doing nothing will cost more.”
How do you think Australia is faring economically? Are you saving more money since the pandemic hit?
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