JobKeeper withdrawal consequences ‘disastrous’

Sarah Kendell
— 1 minute read

Withdrawal of the government’s JobKeeper scheme in September would be catastrophic for the economy given the COVID recession will be at least three times worse than Australia’s last downturn in 1991, an economic think tank has said.

Addressing the Senate select committee on COVID-19 on Thursday, Australia Institute chief economist Richard Denniss said the consequences of the withdrawal of JobKeeper within the government’s current stated time frame would be “disastrous”, given the scheme was “the only thing keeping the economy afloat”.

“While government has rolled out significant stimulus to date, the fact that hidden unemployment is still substantial is in itself proof that the stimulus hasn’t been big enough to stop unemployment rising, and it’s concerning to hear talk about spending less in the second half of the year than in the first half,” Dr Denniss said.


“The only thing keeping the economy afloat is the increase in government spending, yet the government is promising to cut that in the second half of the year – the consequences of that are disastrous. 

“There are hundreds of thousands of people that are going to see a pay cut if they move from JobKeeper to JobSeeker, and if we cut JobSeeker then hundreds of thousands of people will see their income fall even further. At the moment what the government is promising to do can only have one effect on consumer spending.”

Australia Institute senior research fellow David Richardson added that every $1 million spent on JobKeeper was currently keeping around 25 people in work, compared to $1 million in consumer spending which supported three to four jobs.

Dr Denniss said the Australian economy was “heading for the largest recession in modern history”, given current forecasts were assuming a drop of up to 10 per cent in GDP for the calendar year.

“The 1991 recession saw GDP fall 1.5 per cent, and the forecast for the recession we’re likely to experience ranges from 5 to 10 per cent,” he said.

“Even the most optimistic predictions are that this will be three times worse than the 1991 recession.”

He added that recently announced job creation programs did not go far enough to tackle the scale of jobs that had been lost, and would lead to a patchy recovery that disproportionately benefited certain groups, industries or regions.

“It’s meaningless to talk about the size of the stimulus and not the shape – it needs to be customised to go to where unemployment is and where it’s rising, and it needs to pay attention to gender, age and skills distribution,” Dr Denniss said. 

“Spending billions of dollars in construction won’t create a single job for people working in a different state or in a different industry. We need to target support to where jobs need to be created, not just talk about how much money is being spent.”


JobKeeper withdrawal consequences ‘disastrous’
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