‘I’m really scared’: how the looming cuts to Covid welfare payments are worrying millions

The federal government’s Covid-response boost to income support offered something critics say was long denied to Australian welfare recipients: a genuine safety net.

Six months after welfare benefits were doubled, that support is now falling away. And for millions of people relying on jobseeker or jobkeeper payments, the strange sense of financial security that accompanied the pandemic is now giving way to anxiety and fear.

“I’m really scared how I’m going to manage after December,” says Angela Cadwallen, a 55-year-old jobseeker from western Sydney. “Getting that supplement made a huge difference, otherwise I don’t know where I’d be.”

Back in April, the government introduced a $550-a-fortnight coronavirus supplement to the jobseeker payment, lifting the rate to $1,115. It has now tapered the supplement down to $250, and it is set to expire altogether in December.

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To keep people connected to jobs and out of the welfare system, the government also created the jobkeeper subsidy. The payment goes to about 2 million workers at cash-strapped businesses but will expire in March, likely triggering an influx of new jobseeker recipients.

What is most unclear for those people – and the 1.4 million already on jobseeker – is how much money they might have to live on next year.

The result is that people like Cadwallen, who lives with her son and his four-year-old daughter, are already turning their minds to tough decisions.

“If my son doesn’t get a job between now and when that payment changes, we’ll have to find somewhere else to live,” she says.

Before the pandemic, the jobseeker payment was about $565 a fortnight, or about $40 a day, plus some supplementary payments.

Government ministers have indicated they are open to a further temporary extension of the coronavirus supplement, at an undisclosed rate, but notably absent from the federal budget was a permanent increase to the jobseeker payment. The government says it may not make a call until December, when it believes it will have a clearer view of the economy.

If jobseeker reverts to the old rate, Cadwallen may have to access her superannuation. She has had to do so once already, when her son lost his job at the start of the pandemic.

“I wasn’t happy,” she says. “I have bugger all super – I only had about $50,000.”

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Similar conversations have been playing out in households across the country in recent weeks. Last month, the government started unpicking what Scott Morrison described at the start of the crisis as the “supercharged safety net”.

As well as reducing the coronavirus supplement, the government cut the jobkeeper wage subsidy paid to about 2 million people.

The payments fell from $1,500 to $1,200 a fortnight, and a part-time rate of $750 was introduced. In January, jobkeeper will fall to $1,000 and $650, before the subsidy is scrapped in March.

“January is the part that is stressing me,” says James McRae, who, like Cadwallen, is expecting to make a second superannuation withdrawal to cover rent, car repayments and other debts.

McRae, 42, was working full-time hours in baggage services at Sydney airport but is now on the reduced jobkeeper rate of $1,200 a fortnight.

He is baffled by the decision to taper the payments. “Nothing has really changed for those people who can’t work,” McRae says. “In this industry, those borders are still closed, we can’t go to work. We’re not suddenly worth less money, we don’t suddenly have less expenses.”

McRae’s wife is still working full-time and he has managed to get some casual work in his past profession as a teacher. He recognises he has it better than many, including those at companies in his industry that were ineligible for jobkeeper.

But he won’t be eligible for jobseeker payments when jobkeeper ends, because his wife earns more than the income test of about $80,000 a year.

“I’ve already reduced costs everywhere else,” he says. “We’re not doing some of our more luxury things like [going to] cafes, which is good, but also means we’re not spending money in the community either.”

Associate Prof Ben Phillips, whose research has found pandemic-boosted benefits spared about 2.2 million from poverty, says uncertainty about the future of welfare payments could cause some to “squirrel money away”.

“That would be a negative for the economy,” says Phillips, of Australian National University’s Centre for Social Research and Methods.

A report by Deloitte last month estimated the reduction and eventual end to the coronavirus supplement could cost the economy $31bn due to reduced household spending.

This week in Warwick in south-east Queensland, Emma Lenz, a single mother of two, received her first parenting payment since the supplement was cut by $300.

“I’ll be buying nothing from now on except what I need,” says Lenz, 39. “And I’ll put some extra on the power and rent, just so that at Christmas, when my kids are off school and I can’t work, my bills are paid.”

While much of the debate about the rate of welfare payments has focused on jobseekers, the future of the coronavirus supplement will also affect those on student and parenting payments.

Overall, about 2.3 million people have been getting the supplement, and Lenz’s daughter, 10, and son, seven, are among the 1 million children who live in families that have benefited from it.

Lenz, who juggles parenting with casual paid work and part-time study, says the supplement was briefly life-changing.

“My son’s seven and I’ve never actually purchased new linen for him,” she says. “That’s all been second-hand or hand-me-downs. He’s got his first doona for the first time in his life, and he’s stoked.

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“They’ve got both new underwear and socks. I just thought of [getting] as much as I could, because I knew [the supplement] was running out.”

Now she’s back to old habits like “adding up ever dollar” as she walks around the supermarket.

Fearing the worst, Cadwallen’s family is already looking for a new house, but she says she’s struggled to find anything cheaper than the $450 a week they currently pay in the Penrith area.

“I can live in a dump, but when you’ve got a little kid, you need somewhere halfway decent, you don’t want to be living in squalor,” she says.

Cadwallen was receiving worker’s compensation on top of her jobseeker payments until August, but the boosted pandemic payments meant she was still be able to manage.

Without the supplement, that’s much less certain. “Next year is going to be pretty tough,” she says.