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Coalition criticised for saving nearly $1bn on job services as unemployment soars

<span>Photograph: William West/AFP via Getty Images</span>
Photograph: William West/AFP via Getty Images

The federal government has been criticised for booking close to $1bn in budget savings from employment services programs despite the number of job seekers doubling during the pandemic.

The budget papers state the government will “further leverage and refocus existing employment services programs” which is “estimated to result in savings of $1.4bn over four years”.

Most of the savings come from an expansion of an online employment services platform that will connect fewer job seekers with a face-to-face job agency, which has already drawn a mixed response from advocates and experts.

Related: The overlooked parts of the 2020 Australian budget you should know about

Despite extra funding for some employment services programs, the budget papers suggest net savings of about $930m.

Sally Sinclair, the chief executive of the National Employment Services Association which represents job agencies, said making savings during an “unemployment crisis could result in a long-term unemployment catastrophe”.

“Government should be increasing its investment in employment support at this time, not decreasing it,” Sinclair said.

Experts note the shift to the online system is likely to cost private job agencies extra revenue given they would otherwise have provided services to a larger slice of the 1.5m people now on job seeker payments.

Rachel Siewert, a Greens senator and critic of the jobactive system, agreed it didn’t make sense to take money “out of the employment services budget when we have high and growing unemployment”.

“More people than ever will be accessing their services,” she said. “What we need to do is improve our employment services.”

Brendan O’Connor, Labor’s employment services spokesman, said any budget savings should be directed towards “fairer wage subsidy programs for job seekers”.

“Despite the massive amount of spending, they are cutting from employment services provisions, which will cost jobs, rather than improving services that should help get Australians into work,” he said.

The opposition argues the government’s new $4bn wage subsidy scheme – which will hand $200 a week to employers who hire job seekers under 35 – still excludes about 900,000 people on unemployment payments.

The budget papers show that even with the net savings of about $930m, overall jobactive funding will still increase by $1.1bn over the forward estimates. That’s likely due to a blow out in administration fees paid to job agencies due to increased unemployment.

Under the new online employment services, brought forward from a scheduled 2022 start date to be rolled out during the pandemic, job seekers use a digital platform to conduct and log their job search rather than attending face-to-face meetings with job agencies.

The development of the new digital employment services platform will cost $295.9m over four years, according to the budget papers. The government argues sending most “job-ready” job seekers to the platform will free up jobactive agencies to focus on helping the most disadvantaged back into work.

But providers claim many vulnerable job seekers are being wrongly referred to the platform, while the Australian Unemployed Workers Union (AUWU), which is otherwise highly critical of job agencies, has also warned people are being left without support.

Kristin O’Connell, an AUWU spokesperson, said the government should be increasing spending on employment services, but the programs should be optional.

O’Connell said the online service was being rolled out “very quickly, without proper planning, trial or review”. “There’s nothing to show whether it’s going to help people,” she said. “But we’re always glad to see that people have the option not to engage with a job agency.”

Simone Casey, a policy analyst at Per Capita, said it was “legitimate” to divert funding away from the providers to focus on the digital system.

“Are they taking this [money] away from jobs seekers who need help? It depends on whether you think jobactive is effective,” Casey said. “Jobactive is not effective.”

The OECD has found Australia spends less than the average on employment services programs among developed nations. But under the Australian system, which is privatised, agencies have been accused of reaping millions by focusing on getting more “job-ready” people into work.

The $1.4bn in savings are also drawn from policy changes that will reduce funding to the controversial Path internships program.

Asked to quantify how the savings would be spent, a department spokeswoman said only that the savings would be “reinvested in government priorities in the Employment, Skills, Small and Family Business portfolio”.

“Further, it is important to note that across the forward estimates, jobactive funding will increase by $1.1 billion due to the impact of Treasury unemployment forecasts,” she said. The spokeswoman added that job seekers could opt-out of the online service if they wanted to be connected to a job agency.

The budget includes extra funding to expand smaller programs such as the Transitions to Work scheme for disadvantaged young people, as well as $62.8m on a local jobs program across 25 regions.