Australia's economic recovery at risk if poorest left behind

BY Paul Zahra
16 February 2021

Australia’s economic recovery will be slow and steady but there are promising signs things are heading in the right direction.

Retail sales are tracking up over the previous year and we’ve seen a quicker than expected reduction in the unemployment rate. There is no doubt that government action, supported by businesses, community organisations and the people of Australia have seen our country withstand the impact of the Covid pandemic better than most.

We have truly been ‘in this together,’ but our next test is ensuring this recovery leaves no one behind.

JobKeeper and the JobSeeker coronavirus supplement is real have been key to stimulating the economy, but there are pockets of retail goods and services still deeply struggling – in particular those who’ve been in areas affected by lockdowns, CBD locations or retailers that are highly reliant on international travel.

According to the Department of Social Services, the number of people receiving unemployment payments or JobSeeker doubled as a result of Covid - up from 800,000 in October 2019 to 1.5 million by December 2020.

And it will no doubt increase again once the JobKeeper wage subsidy is withdrawn.

A lot of us will know someone who is affected.

It’s deeply concerning that close to two million people could need to survive on less than $40 a day or $565 a fortnight if the JobSeeker coronavirus supplement is completely taken away. That’s just $14,700 a year. To put that in perspective, the minimum wage is $39,000 a year.

The $340 billion retail sector is our largest private sector employer – providing jobs for about 1.2 million people – that’s 1 in 10 Australian workers. We are the largest employer of young people – many of you reading this will have had your first job in a shop or food outlet.

Modelling by Deloitte Access Economics found if the Government completely cuts the coronavirus supplement, reducing people back to a base rate for JobSeeker of $40 a day, the economy will lose $31 billion and 145,000 jobs.

This is because people on the lowest incomes spend every dollar on essential items – like food, clothes and medicine. Every dollar spent in retail, gives someone a job - from sales staff to manufacturers to the truck driver delivering the goods. One person’s spending is another person’s income.

There is hard data on this – a spending tracker developed by analytics firm AlphaBeta found that at the height of the pandemic last June, spending by those earning less than $65,000 a year was 20 per cent higher than normal. They were spending it on essentials like food and utility bills, and on other retail items like toiletries and appliances.

There is no doubt that government support, including the coronavirus supplement, helped us avoid a deep slump in consumer spending. But we ask, what will be the impact once it’s withdrawn?

If JobSeeker is cut back to $40 a day ACOSS research shows that one of the first things people cut back on is food. Food and grocery outlets across the country can expect to see lower spending as people try to survive on fewer than three meals a day.

Parents will regularly skip meals so their kids can eat. People will cut back on fresh fruit and vegetables, and even basic toiletry items like shampoo and toothpaste. They will struggle to afford birthday presents for kids, fuel for the car, shoes, haircuts and other essentials.

We can afford to be a nation that takes care of our most vulnerable and ensure that the end of the pandemic does not relegate millions to a life of severe hardship. Not taking care of people will harm our economic recovery and our national psyche and confidence.

We have seen firsthand how lifting JobSeeker was one the best forms of economic stimulus. The government is well positioned to make this good move a permanent one - so we continue to help vulnerable Australians feed themselves and our economy.

New call-to-action

ABOUT THE AUTHOR

Paul Zahra

Paul Zahra is the CEO of the Australian Retailers Association. As a leading retail expert, he has worked in the industry for nearly forty years holding senior leadership roles at some of Australia’s largest ASX listed retailers. He has also worked with start-ups, private equity and small retail businesses.

Become a Retail Insider

Join 11,000+ Australian Retailers