Among those wanting a shift to more targeted spending is University of Melbourne Professor Jeff Borland,whose own analysis shows 250,000 workers could find themselves unemployed by the end of the scheme. He estimates ongoing employment growth,which has averaged 60,000 jobs a month over the past four months,will help absorb some of the job losses.
“The labour market recovery in Australia has been so strong since last May that by February the unemployment rate was back to where it was[pre-pandemic] and given it is an extensive program the time was right to unwind it,” Professor Borland said. “There are better ways to provide ongoing stimulus.”
Federal,state and territory governments have been spending at unprecedented levels to steer the nation through the coronavirus pandemic,with hundreds of billions of dollars in stimulus and support payments expected to seenet public debt triple to $1.3 trillion over the next three years. The federal government has unveiled some significant support packages for hard-hit sectors such as tourism to help keep them afloat now JobKeeper,which was supporting about 1.1 million workers,has ended.
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But Professor Borland said more government spending was needed to drive the unemployment rate from5.8 per cent – which is well down on the 7.5 per cent rate at the height of the pandemic – to below 4.5 per cent,but it should be done more carefully.
“We’ve been paying for lots of people’s wage costs who employers would’ve paid for anyway ... When you’re in a difficult situation you can justify that relatively un-targeted spend,but with the labour market having recovered I don’t think you can justify a scheme that isn’t well-targeted,” he said.
Independent economist Saul Eslake said there was “never going to be a perfect time” to end a major program but it was now appropriate to change tack. New Zealand’s wage subsidy scheme ended in September 2020 and employment there improved in the December quarter while the jobless rate decreased,he said.