A government that has repeatedly rejected calls to raise unemployment benefits has now doubled the payment virtually overnight for a six-month period, and is going out of its way to tell people it's OK to receive this support. But just how feasible — or sensible — it will be to reverse these changes to unemployment benefits in six months' time, as the government plans to, is very much an open question. Illustration: Simon Letch Credit: Until the pandemic struck, the government had steadfastly refused to raise the dole from roughly $40 a day by any more than the rate of inflation. Union leaders, chief executives, and even former prime minister John Howard have all suggested the payment was too low.

Australian National University professor Peter Whiteford has argued Australia's (pre-pandemic) unemployment benefits are also low by international standards. He wrote last year that unemployment benefits and rent assistance, as a share of workers' previous incomes, were lower here than in the rest of the Organisation for Economic Cooperation and Development (noting that other countries have different insurance schemes for the jobless). But the government was not convinced change was needed. Labor also opted against lifting the payment when it was last in government, though it supports a higher level today. Now, as part of the Morrison government's response to the pandemic, it has temporarily doubled the payment, known as JobSeeker, to just over $1100 a fortnight. The government says this increase through a "coronavirus supplement" will last six months, with Morrison flagging a "snap back" in extraordinary public spending once the virus threat has passed. But just how politically feasible will it be to wind back unemployment benefits so sharply at a time when many thousands more people are forecast to be out of work? Moreover, would such a move make economic sense?

Loading Replay Replay video Play video Play video It’s hard to dispute that many of the government’s rescue policies must be temporary because these are indeed extraordinary economic circumstances that will ultimately improve. Even so, reverting to the meagre pre-pandemic dole payments will be challenging for a few reasons. First, it's a sad reality that many more people are likely to find themselves out of work even after the virus threat has passed. That’s likely to change how politicians talk about unemployment. Economists believe the unemployment rate could hit 10 per cent by the middle of this year, from 5.1 per cent in February. As bleak as this is, it would have been much worse if not for the JobKeeper scheme, which will pay subsidies to help up to 6 million people to remain on the books while employers go into "hibernation." But a critical question is: what state will many of businesses be in after hibernating? No one knows the answer, but banks are bracing for some of the firms in "hibernation" to fold, sending more people onto social security.

Many more voters will probably have a friend, family member or acquaintance who’s receiving some form of government payment if this recession is as bad as many expect. In this type of world, will there be the same political mileage in rhetoric such as former Coalition treasurer Joe Hockey's distinction between "lifters" and "leaners"? You’d think not. Second, there are orthodox economic arguments for a longer-lasting income boost for people earning the least in our society, especially in a recession. Put simply, low-income earners are more likely to spend rather than save any extra dollars they receive, and this extra consumption flows on to businesses. Loading Data from the consultancy, AlphaBeta, last week suggested this might already be happening, with a one-off $750 payment to pensioners and social security recipients helping to partially offset a plunge in consumer spending. But what about the cost?

The government's "coronavirus supplement" costs $14 billion over four years, but a smaller and more targeted increase in the dole would cost substantially less. Deloitte Access Economics, in work commissioned by the Australian Council for Social Services, estimated in 2018 that a $75-a-week boost in various social security allowances would cost the budget $3.3 billion a year. It maintained the funding injection would create 12,000 jobs, but more importantly, the benefits would flow to the "poorest" people in Australia. And this highlights the moral case for some degree of longer-term increase to unemployment benefits, rather than a "snap back". These arguments may have been overlooked previously, but perhaps they’ll get a better hearing in a world of higher unemployment. And maybe, in that world, the government won’t feel the need to talk about "fault" when discussing job losses.