RateCity.com.au
powering smart financial decisions

COVID-19: JobSeeker extended but cut by 40 per cent

COVID-19: JobSeeker extended but cut by 40 per cent

The COVID-19 supplementary payment intended to help almost half a million people find work again has been extended for three more months, but it’s also been cut by 40 per cent.

Prime Minister Scott Morrison announced a $3.2 billion package on Tuesday to extend the JobSeeker supplementary payment until March 31, only at a reduced $150 a fortnight -- a drop of $100.

About 428,100 people still have not gained employment since losing their jobs due to the COVID-19 pandemic, according to September figures from the Australian Bureau of Statistics (ABS).

“My number one priority is to get more Australians into work,” Mr Morrison said. “As the country is safely reopening and businesses start to return to full steam, we need to connect those seeking work with available jobs.”

Australians receiving the JobSeeker supplement can still earn up to $300 a fortnight without their social security repayment being reduced, Mr Morrison said, and waiting periods will continue to be waived until the supplement expires.

JobSeeker is paid in addition to the newstart unemployment allowance and other supplements people may be eligible to receive.

The maximum fortnightly payments will take effect from 1 January and are as follows:

  • Single: $715.70
  • Single, with a dependent child or children: $762
  • Single, 60 or older, after 9 continuous months on payment: $762
  • Partnered: $660.80
  • Single principal carer: $943.10

More people are forecast to be out of work

Unemployment surged after the COVID-19 pandemic dawned in March this year. It currently sits at 6.9 per cent with 937,400 people out of work, according to the ABS, well above its typical level of about 5 per cent.

And the number is expected to get worse. The Reserve Bank of Australia estimates it’ll climb to 8 per cent by the end of the year.

Underemployment is also high. The September figure is 11.4 per cent, about three per cent higher than its typical level.

The revised supplement will encourage people to look for work while helping the underemployed, Anne Ruston said, minister for families and social services.

“As the jobs market improves we want to encourage people to re-engage with the workforce because we know that even a few hours of work a week while on payment can have a dramatic impact on the pathway off income support,” she said.

A sombre tone to the holidays

The decision to cut the COVID-19 supplement was criticised by the Australian Council of Social Service, an advocacy group campaigning to reduce poverty and inequality in Australia.

Chief executive Dr Cassandra Goldie described the government’s policy as “out-of-touch with the reality of what people are going through”.

“There is currently only one job vacancy available for every 12 people without paid work or enough paid work, with even less in regional areas,” she said.

“The reduced rate from January to March is only $10 a day more than the old, unlivable Newstart rate, which had not been increased in real terms in more than a quarter of a century.

“The end of the year is often the most expensive time for families and this Christmas is going to be a really hard one for millions, with record-high unemployment.”

Labour market is key to the recovery

Government stimulus payments, RBA policies and bank relief packages have helped buoy people’s confidence in the Australian economy even though it is operating against the backdrop of a pandemic.

The Westpac-Melbourne Institute of Consumer Sentiment, a survey of 1200 adults in the first week of November, increased by 2.5 per cent to 107.7, a high not seen in seven years.

“Given the high degree of uncertainty this Christmas, and the headwinds from the high unemployment rate, it is a very encouraging sign that Australians are planning for a ‘normal’ Christmas,” Bill Evans said, chief economist at Westpac.

But the Unemployment Expectations Index, considered a reliable indicator for sustainable economic recovery, didn’t offer the same optimistic promise.

It rose by 6.2 per cent in November, representing a deterioration in labour market conditions as people anticipate rising unemployment, Mr Evans said.

The result was still 19.7 per cent below its peak in April and 7.3 per cent below the six month average leading up to March.

Did you find this helpful? Why not share this news?

This article was reviewed by Personal Finance Editor Georgia Brown before it was published as part of RateCity's Fact Check process.

Advertisement

RateCity
ratecity-newsletter

Money Health Newsletter

Subscribe for news, tips and expert opinions to help you make smarter financial decisions

By signing up, you agree to the RateCity Privacy Policy, Terms of Use and Disclaimer.

Advertisement

Learn more about savings accounts

How do I open a savings account?

Opening a savings account is a relatively simple process. If you’ve found an account with a suitable interest rate, you’ll just need to get in contact with your chosen lender via a branch, phone call or hop online to begin the process. 

You may be required to provide:

  • Personal details, including identification (driver’s license, passport etc.)
  • Tax file number
  • Employment details

What is a savings account?

A savings account is a type of bank account in which you earn interest on the money you deposit. This makes it one of the easiest and safest investment tools.

Can I overdraft my savings account?

A lot of savings accounts won’t let you overdraw. Some will allow this feature but you’ll need to apply first. It’s best to read the fine print and check with your lender whether this is a feature they offer. It can be a helpful addition, but as your lender can charge you a fee as well as interest for going into negative numbers, it’s best to avoid overdrafting when possible.

Can you have a joint savings account?

Yes. Joint savings accounts can be useful for two or more people wanting to combine their savings to meet shared financial goals, including spouses, flatmates and business partners.

Some joint savings accounts require all parties to sign before they can access the money. While less convenient, this extra security can help encourage all parties to meet their shared financial goals.

Other joint savings accounts allow any of the account holders to access the money. These accounts can be convenient for financially responsible couples that trust one another implicitly. 

How to make money with a savings account?

Savings accounts make you money by earning interest on your savings. The more money you deposit, the longer you leave it in the account, and the higher the account’s interest rate, the more interest you’ll be paid by the bank or financial institution, and the more your wealth will grow.

To make sure your savings account makes money and doesn’t lose money, it’s important to maintain a large enough minimum balance that the annual interest earned exceeds any annual fees charged on the account.

What are the requirements of an ING Bank locked savings account?

An ING bank locked savings account - also called a term deposit - offers you interest in exchange for holding your money for a period of time.

The terms offered include as little as 90 days or as long as two years. Generally, the longer you lock your money away, the higher the rate of interest. 

The minimum deposit amount for an ING locked savings account is $10,000. 

To be eligible to apply, you must: 

  • Be an Australian resident for tax purposes
  • Be aged 13 years or older
  • Hold the account for personal use (ING offers business term deposits as a separate product). 

 

Do I have to claim interest on my savings account?

When you lodge your income tax returns, you must include in the documentation all your sources of income, including bank interest. Your bank will report any interest you earn on the funds in your savings account to the Australian Tax Office (ATO). When the ATO then compares this information with your tax returns,  you also need to have mentioned the interest earned. If there is any discrepancy, you’ll receive a letter from the ATO. 

Avoid this situation by ensuring you receive your bank statement with interest noted. Then declare the interest in your tax returns and pay the tax that’s applicable based on the income tax rate.

You only need to claim your share of the interest earned for joint accounts. If you manage an account for your child and receive or spend money via this account, you will also need to report any interest earned from said account.

Can you set up direct debits from a savings account?

It’s not usually possible to set up a direct debit from your savings account to cover ongoing expenses or bills, as savings accounts are structured around growing your wealth by earning interest on regular deposits, and discouraging withdrawals.

Some transaction accounts allow you to set up direct debits and also earn interest, though you may not enjoy as much flexibility as a dedicated transaction account, or get as high an interest rate as a dedicated savings account.

Can you direct deposit to a savings account?

Yes. You can make one off payments or set up regular direct deposits into a savings account. This can be organised easily through online banking or by making deposits in a branch. Talk to your lender to find out the easiest way for you to set up direct deposits.

Do banks run credit checks on savings accounts?

When you apply to open a new savings account, some providers may conduct a credit check, meaning that they will ask a credit bureau for your credit history. This isn’t always the case on savings accounts though and depends on the provider, as you aren’t borrowing money. 

As you are opening a savings account and not borrowing funds, this credit check is considered a soft inquiry and should not affect your credit score. If the bank has run the credit check, you can often still open a savings account even if you have a poor score, provided you meet other requirements. 

How much money should I have in my savings account?

A good rule of thumb when working out a minimum balance for your savings account is to make sure that you’ll earn more in annual interest on your savings than what you’ll be charged in annual fees.

If you’re saving with a specific goal in mind, prepare a budget so the interest you earn on your deposits will help you efficiently reach this goal. Online financial calculators may be helpful here.

Should I open a Commonwealth locked savings account?

If you have trouble saving money, a Commbank locked savings account could be a potential solution. A locked savings account won’t let you make withdrawals and as such, it can help you grow your savings balance if you keep topping it up. 

The Commonwealth locked savings account advertises high-interest rates and minimal maintenance fees, along with a host of other incentives that will encourage you not to touch the money. 

The account offers a higher interest rate for each month that you make limited or no withdrawals, as well as regular deposits. 

To qualify for a Commonwealth locked savings account with the advertised features, you will need to fulfil specific criteria such as:

  • Depositing a fixed minimum amount into the account every month.
  • Making a fixed number of deposits each month.
  • Making a minimum or no withdrawals each month.
  • Maintaining a minimum account balance.

How does interest work on savings accounts?

The type of interest savings accounts accrues is called compound interest. Compound interest is interest paid on the initial deposit amount, as well as the accumulated interest on money you have. This is different from simple interest where interest is paid at the end of a specified term. Compound interest allows you to earn interest on interest at a higher frequency. 

Example: John deposits $10,000 into a savings account with an interest rate of 5 per cent that he leaves untouched for 10 years. At the end of the first year he will have $10,512 in savings. After ten years, he will have saved $16,470.

What is a good interest rate for a savings account?

A good rule of thumb to keep in mind with savings accounts is to look for a rate that is higher than the CPI inflation rate. This number is constantly changing, so check the Reserve Bank of Australia’s page. If you aren’t earning interest above this then the value of your money will go backwards over time.