An extra 330,000 people will be thrown below the poverty line when the federal government reduces the coronavirus supplement after Christmas, analysis shows.
Modelling by the Australian National University’s Ben Phillips shows the $100 reduction to the fortnightly supplement from 1 January would see the number of people in Australia living in poverty increase to 3.82 million.
The supplement, which began at $550 a fortnight in April but was tapered down to $250 in late September, is paid to about two million welfare recipients who already receive jobseeker, student and parenting payments.
Along with the jobkeeper wage subsidy, the boosted benefit initially shielded 2.2 million from poverty, according to Phillips’ past research.
But the subsequent reduction of the supplement to $250 a fortnight in late September pushed the poverty rate higher than before the pandemic.
The most recent changes, announced by the government last month, will reduce the supplement to $150 a fortnight, taking the base rate of the jobseeker payment for a single person to $715.
Phillips told Guardian Australia that his modelling suggested the reduction would increase the number of people living in poverty from 3.49 million to 3.82 million by January.
His analysis sets the poverty line at $370 per week, which is 50% of median income, after housing costs.
It takes into account Treasury forecasts disclosed in Senate estimates last month that predicted the number of people on the jobseeker payment would increase from about 1.5 million to 1.8 million by Christmas.
Phillips also finds that if the coronavirus supplement had remained at $550, there would be about 2.66 million living below the poverty line by January.
This means the decision to reduce the supplement down to the 1 January rate will result in an extra 1.16 million people living below the poverty line by the start of next year.
Last week, the prime minister, Scott Morrison, said the government’s instinct when it boosted benefits was to “cushion the blow” of the recession, but that the reductions were needed to incentivise people to take up work.
“We cannot stay stuck in neutral in this country, we have got to keep moving forward,” he said, noting the extension to March would cost $3.2bn.
But Kristin O’Connell, an Australian Unemployed Workers Union spokeswoman, said the “drastic income cut” imposed in September had prompted an “outpouring of stories of mental and emotional distress from people on welfare payments”.
She said the decisions to throw hundreds of thousands more people into poverty was a “cruel choice”.
“We know that the only moral thing for the government to do is to uphold its duty of care and keep people who rely on welfare payments out of poverty,” she said.
Phillips said keeping the jobseeker payment at the current rate – $815 per fortnight including the $250 supplement – might have been “reasonable” in “normal times”.
“It’s probably still a bit stingy, I think you could say, but perhaps it’s a reasonable trade-off between those competing priorities with welfare,” he said.
“I think dropping much below that that you really are just shifting people into fairly dire financial position.”
But Phillips said it did not make sense to be “lowering unemployment payments to such an extent” now given the recession.
“I think you’d rather have that money flowing through the economy and being spent at the higher rates,” he said.
He also noted that the continued reductions to the jobseeker payment meant Australia was moving “down the path again of the deserving and undeserving poor”.
“You’ve got the jobseeker rate of $715 per fortnight and the jobkeeper rate at $1,200 per fortnight,” he said.
“Initially there was a gap of $380 per fortnight, now that’s really ballooned. Those on jobkeeper are above the poverty line, those on jobseeker are below it.”
Deloitte estimated in a report released in September that removing the supplement altogether by Christmas would cost the economy $31bn in reduced spending and the equivalent of 145,000 full-time jobs over two years.
The government has said it will continue the jobseeker supplement at $150 a fortnight until March, but has declined to outline its plans for welfare payments beyond that.
The jobkeeper wage subsidy is set to end in March, which will likely lead to an influx of new jobseeker payment claims.