As full force of the pandemic became evident around this time last year, various things happened all at once.
The fortnightly Newstart allowance – for unemployed people aged 22 or over – was promptly stopped in 20 March 2020, to be replaced by JobSeeker.
JobSeeker was more generous than the previous Newstart allowance, providing $1,200 a fortnight to those that qualified. This effectively doubled the payout, for the first six months.
From the beginning, this action was temporary government intervention designed to keep the wheels of the economy moving, and was always going to be pared back or removed altogether over time.
JobKeeper – the temporary salary top-up for employed Australians – was reduced in September 2020, and will be phased out completely at the end of this month.
Meanwhile, JobSeeker is going to become the regular unemployment benefit payment, and will be reduced back, also at the end of this month, albeit at a $50 per fortnight higher rate than the equivalent Newstart level of a year ago.
Confused? Well indeed. It’s a moving feast, and for many it is not a feast at all. While some may be better off, welfare recipients could be $250 a week worse off as compared to the pre-pandemic situation.
This is because of various other supplementary benefits being changed such as the youth allowance, Austudy and the parenting payment.
Effects on Property?
As CoreLogic argued earlier this week, JobSeeker has already been reduced, and there has been little noticeable impact on the Australian property market.
The initial (March 2020) $275 per week supplement was reduced to $125 in September and $75 in early 2021.
Yet the housing market has – if anything – accelerated during this time. Between the end of September 2020 running up to January 2021, CoreLogic’s national home value index rose 3.2%, and rental values increased 2.5%.
Value of JobSeeker ‘Coronavirus Supplement’ versus property price/rental growth
Another point to make is the labour market is fairly strong, and seemingly getting stronger. Unemployment is around 6%, and if anything, employers are more worried about skill shortages than the pandemic or falling demand.
Data from the Australian Government Department of Social Services (DSS) suggests there were 11.7% fewer JobSeeker recipients toward the end January 2021, compared with the end of September 2020.
“However, there is still a heightened risk to wider-spread housing stress, as the number of JobSeeker recipients at January was still 55.9% higher than at the onset of COVID-19 in March 2020,” noted analysis from CoreLogic.
Picking apart one factor from the multitudinous factors behind the complex property market is very difficult. JobSeeker recipients are more like to be renters than homeowners, but just because their payments are falling and rents continue to rise does not mean there is no underlying effect going on.
Everything else being equal, investors also may be less interested in buying investment properties if renters have less money, and yields are down.
Digging into the data, regions where JobSeeker payments are highest provide mixed results as to its effect (if any can be teased out) on rental values.
In outback North Territory towns such as Charles or Tennant Creek where 20% or more of the population receive JobSeeker, rents went up 3.4% and 5.3% respectively during the time when payments fell (September to January, last).
So rents rose more in these areas than across the country, on average.
However, in Carpentaria, outback Queensland, rents fell 1.1% in an area where 15% or so of the population were on JobSeeker.
It’s clear other factors are outweighing the ‘JobSeeker Effect’, such as it is.
What we don’t know is what would have happened otherwise, of course, in the absence of Covid and JobSeeker. Which makes it hard to gauge the effects of removing these supplements at the end of the month. The best guess is it might have some impact at the margins, but bigger factors are at play, and the rental property market will continue to be hot for some time, regardless.
However, as CoreLogic’s research concludes:
“… Housing stress, and even homelessness, may be faced by individuals whose livelihoods have been impacted by COVID-19.
“While changes to JobSeeker are unlikely to impact the housing market, the welfare reduction could greatly disrupt housing situations for many.”