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.

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Learn more about savings accounts

Can you set up a savings account online?

Yes. Several large and small banks offer online applications for savings accounts, and there are also online-only financial institutions to consider.

Online-only savings accounts are often less expensive than other savings accounts, though they may not offer the same flexibility, features, or face-to-face service as more traditional savings accounts.

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As banks frequently change their rates, the most accurate way to look at interest rates on savings accounts is to use a savings accounts comparison tool. When you look at the savings rate check what the maximum and minimum rates are. Often banks will offer you a promotional rate for the first few months which is competitive, but then revert back to a base rate which can sometimes be less than inflation. Ongoing bonus rates are often a safer bet as they will keep rewarding you with the maximum rate, provided you meet their criteria

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 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.

Who has the highest interest rates for savings accounts?

As banks frequently change their rates, the most accurate way to know who currently has the highest interest rate is to use a savings account comparison tool.

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.

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.

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.

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.

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While personal loans and medium amount loans don’t offer guaranteed approval, there are steps you can take to help increase the likelihood of your application being approved, including:

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How to open a savings account for my child?

Some banks and financial institutions allow parents to open a bank account for their child as soon as it is born, and start depositing funds to go towards the child’s future.

Children’s savings accounts generally don’t have fees, and are structured to help develop positive financial habits by limiting withdrawals, encouraging regular deposits, and earning interest on the savings, similarly to standard 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.)
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