Poverty fell through the first year of COVID – and then increased

Hundreds of thousands of Australians who escaped poverty through the early stages of the COVID recession due to government support have returned to a financially precarious position even as the economy has strengthened.

Research headed by the University of NSW and released on Wednesday reveals the coronavirus supplement and the JobKeeper program were key factors in pushing the proportion of Australians living in poverty below 10 per cent. It had been 11.8 per cent in 2019.

Poverty levels fell sharply across Australia through 2020 due to federal government support. But it has since lifted above its pre-virus levels.Credit:Jason South

But the end of JobKeeper and the supplement, despite a $25-a-week increase in the base JobSeeker payment, has seen the proportion of Australians living in poverty rise to 14 per cent, or more than 3.8 million people.

Charities and social welfare organisations noted a sharp fall in financial pressures early in the COVID recession as the federal government put in place the $1500-a-fortnight JobKeeper wage subsidy and the coronavirus supplement, which was worth $550 a fortnight to people on welfare payments including JobSeeker.

The UNSW and Australian Council of Social Service (ACOSS) research found that without the various COVID-19 income support programs, the number of people in poverty would have soared to almost 6 million, or nearly a quarter of all Australians. Instead, the total number fell to 2.6 million.

Poverty among households reliant on JobSeeker payments fell from 76 per cent in 2019 to just 15 per cent in mid-2020. The proportion of people relying on emergency relief dropped to 9 per cent from 14 per cent, with a similar fall in the proportion of households having trouble paying their bills.

But once the support measures were wound back or stopped, poverty started increasing. Poverty levels in households reliant on JobSeeker rose to 48 per cent by early 2021 while among sole parent families it increased to 31 per cent from 19 per cent.

UNSW Social Policy Research Centre director Carla Treloar said the federal government’s decisions to end the coronavirus supplement and JobKeeper without adequate substitutes had actually locked more people into poverty.

“Despite remarkable early progress in reducing poverty and income inequality during the COVID-19 recession, they are both likely to be higher now than before the pandemic. That’s the legacy of the policy response to the COVID pandemic,” she said.

The impact of the various COVID-19 support measures on overall incomes was evident in the research, with only high-income earners suffering a fall in after-tax incomes in 2020.

The result is in stark contrast with previous recessions. Following the 1981-82 recession, after-tax incomes across every bracket except the top 10 per cent fell, while the entire community went backwards after the 1991-92 recession.

Through last year’s economic recovery, and then the Delta outbreak, the research found high-income earners had benefited from the improving jobs market and asset prices, with strong growth in “high-paying” jobs and investment income.

ACOSS chief executive Cassandra Goldie said COVID-19 had proved that good social policy was also good economics.

“The COVID-19 pandemic has taught us that poverty and inequality are not an inevitable state of being. They grow because government policies allow them to, and in many cases, directly increase them,” she said.

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