As interest rates bite and unemployment rises, is there finally good news for those on JobSeeker?
The budget paints a bleak picture when it comes to the economy over the next few years. It is not predicting a recession but rather a big slowdown in economic activity. Economic growth is predicted to more than halve from 3.25% this year to 1.5% next year. Consumers who have been hit hard by interest rate increases will see their spending growth slashed from 5.75% this year to 1.5% next year.
The labour market will also be hit, seeing growth in employment fall from 2.5% to just 1%. Unemployment is predicted to increase from 3.5% to 4.25% next year and 4.5% a year later. If the unemployment rate gets to 4.5%, that will mean an extra 140,000 unemployed.
This is exactly what the RBA is trying to achieve. The RBA Governor has said that in order for inflation to get back into the Reserve Bank’s target range of 2% -3%, unemployment will need to rise to 4.5%. At the same time that unemployment is predicted to get to 4.5%, Treasury is also predicting that inflation will go from 6% this year to 3.25% next year and then into the RBA target range at 2.75% the following year.
Reducing inflation by slowing the economy and increasing unemployment is a tried and tested method, but it does push thousands of Australians into poverty. The government could fix this by increasing Jobseeker up to at least the poverty line. One of the important budget measures this year was an increase in the base rate of Jobseeker.
To move people on Jobseeker out of poverty, the rate would need to increase by about $25 a day. The Government has lifted the base rate of Jobseeker by a bit less than $3 a day. That moves those on Jobseeker to be about 15% closer to the poverty line.
It’s good that Jobseeker has increased but it’s not nearly enough. Particularly at a time when the RBA is pushing more people into unemployment in order to fight inflation.
Tanya Martin Office Manager
Jake Wishart Senior Media Adviser