On Thursday the Ministry of Social Affairs released weekly figures for recipients of job search benefits. In the past four weeks, 426,000 people have become job seekers. 1.22 million benefits is a two-thirds increase from the 730,000 people who in February received Newstart which is now replaced.

While it is not possible to precisely align this with the unemployment rate, especially since there is also a 40% increase in those accessing youth benefits, the rough estimate is that this means that the figure could rise from 5.2% in March to 9.0% in in May. The 4.8 percentage point increase was preferable to dwarf the previous two month’s increase of 1.3 percentage points that occurred during the 1982 recession.

And yes (that’s not really important at this point) that means us now in recession.

The problem is not only that this is a large number of unemployed people, but the current government policy applies with the assumption that within five months they will return to work.

This recipient from last week will now receive additional supplements in two weeks – double the usual rate. But this is scheduled to end on September 24 (ie less than the six months suggested earlier).

And with that a big problem arises because it’s not only very clear that the old rate is not enough to last, eliminating the double before the unemployment rate starts to decrease will only worsen the lack of economic activity.

There are two reasons why the government is doubling job seeker’s benefits. The first is quite cynically honest.

Because of the crisis, people who have not been unemployed for years, if ever, are now expected to survive on job seeker benefits. The old rate is fine politically, but having many voters suddenly experience what life like at $ 40 a day is not conducive to winning their votes at election time.

This led to the line from the government from the beginning that these unemployed people did not deserve their fate and it was therefore right that the amount doubled to help them during this difficult time.

The second reason is that this is an effective way to provide stimulus to the economy. Something that is needed even before the virus attacks.

In October last year – well before the full impact of the forest fires let alone the corona virus – that IMF downgraded our forecast for GDP growth this year is from 2.8% to 2.3%, the private sector will step down, as is a new construction. So bad are the things we’ve heard about RBA that require negative interest rates or quantitative easing.

Unemployment is the only good news the government can show – and that was only good for that long You don’t look too deep.

Now even a superficial look reveals horror.

And is there anyone who really expects a return to something approaching the March 5.2% unemployment rate at the end of September?

It takes a long time to get back to “normal”. In the 1980s it took almost seven years for the unemployment rate to return to pre-recession levels, and nearly 11 years after the 1990s recession.

Our hospitality and higher education sector may change irrevocably – does anyone see an immediate time when international travel like six months ago?

Entertainment, sporting events, and all businesses and jobs that are around them seem far, further than October.

Doubling job seeker benefits provides a stimulus for the economy; removing it will have the opposite effect. This would be a big brake on the economy at a time when it was highly unlikely the private sector would be ready to take over.

Savings aren’t about balancing budgets, it’s about cutting growth. That might be fine if the private sector surges, but if not, it only threatens to keep Australia in a recession longer than it should be purely to abide by the discredited economic management views.

Greg Jericho writes about economics for the Australian Guardian

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