More than 1 million Australians will have their welfare payments shaved from tomorrow as the Government continues to wind back coronavirus assistance

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A woman looks at the camera with a stern look

More than 1 million Australians will have their welfare payments shaved from tomorrow as the Government continues to wind back coronavirus assistance.

Key points:

  • The coronavirus supplement, paid to more than a million Australians, will be reduced from $125 to $75 per week from January 1
  • When the payment was $275 in September, it pushed recipients above the poverty line
  • The Government has rejected calls to increase unemployment benefits, and says it is focused on jobs creation

The coronavirus supplement — a top-up payment for more than a million welfare recipients — will decrease from $125 per week to $75 per week on January 1 and it will disappear entirely on March 31.

It was as high as $275 per week between April and September.

Teacher and housing union organiser Jesse James Frances says the financial squeeze leads to a cycle of difficult choices.

“It’s extremely nerve-racking,” they said.

They face a bill of $800 for a car service as well as a broken tooth.

“My car needs a service that’s going to be about $600 or $800 and I don’t have that at the moment, so I’m just sort of stalling and holding off on getting my car serviced.

“I feel like if I don’t proactively fix the tooth, I’m going to be in more trouble.”

Analysis by the Grattan Institute found the coronavirus supplement, at its peak, lifted those on unemployment benefits above both the relative poverty line — equivalent to 50 per cent of the median income — and the Henderson poverty line.

The Henderson line is based on a benchmark income set in the 1970s required to support the basic needs of a family of two adults and two dependent children.

It was the first time in more than 20 years that Australian welfare payments had exceeded either poverty measure.

A chart showing how far unemployment benefits are below the poverty line.

The unemployment benefit, in inflation-adjusted 2020 dollars, has fallen further and further below the poverty line.(Grattan Institute)

Brendan Coates, program director for household finances at Grattan, said 2020 has shown extra unemployment benefits can make a huge difference in people’s lives.

“It can mean the difference between eating nutritious meals and not,” he said.

Employment has increased as the economy has re-opened in 2020 and Mr Coates argues this counters one argument against increasing welfare permanently.

Labor and Coalition governments in recent decades have resisted calls to increase unemployment benefits.

The current maximum rate for JobSeeker is about $283 per week, paid fortnightly.

The payment tapers off as people earn increasing amounts of income.

Around 1.3 million Australians currently receive payments under JobSeeker while close to 340,000 receive Youth Allowance, a similar payment for those under 24.

Government focused on jobs

A spokesperson for Social Services Minister Anne Ruston said the Government was focused on creating job opportunities.

“As we go forward, the Government’s absolute focus is on jobs creation through JobMaker and helping people to reskill through JobTrainer because we know that getting a job is a real game changer in anyone’s life.”

Portrait of woman sitting on white arm chair with shoulder length hair.

Social Services Minister Anne Ruston has rejected calls to permanently increase JobSeeker.(ABC News: Mark Moore)

JobMaker is a scheme that pays businesses up to $200 a week for hiring people aged under 35 and JobTrainer subsidises training places.

The spokesperson also noted the Government was maintaining relaxed eligibility criteria for some welfare schemes and people could continue to earn up to $150 per week before their payments were reduced.

Cassandra Goldie, chief executive of the Australian Council of Social Service, said the January 1 cut will affect millions of people, many of them children.

“When the Government did the right thing and doubled the rate of JobSeeker — finally the first real increase after 30 years of governments failing to act — it meant that if you were relying on JobSeeker, finally you could afford to put three meals on the table, you could afford to get the occasional hair cut, to get some new shoes.

“These were the sorts of stories that were coming through from people when finally the government did act.”

A smiling woman with blond hair wearing a dark jacket and green top stands outside.

ACOSS CEO Cassandra Goldie wants JobSeeker payments to be increased.(ABC News: Adam Wyatt)

She said Australia cannot afford further cuts to unemployment benefits, particularly as higher unemployment is predicted in 2021.

Prior to the last election, the Labor Party indicated it supported an increase to Newstart, the previous name for JobSeeker.

Other January 1 changes

“In addition to the Supplement, the Government is allowing more Australians on to social security payments and the boosted $300 income-free area that allows people to earn more without losing a cent of payment through to 31 March,” they said.

In addition to the reduction of JobSeeker, the Government has flagged other changes coming into force on January 1:

  • A new, simplified debt restructuring process for when small businesses go insolvent
  • An extension of the HomeBuilder program to March 31, though the grant drops from $25,000 to $15,000 from January 1
  • New requirements for foreign investors.

JobKeeper, the subsidy for businesses to discourage them to sack staff during the pandemic, will be reduced on January 4.

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