Virus support must be wound down: Morrison

Scott Morrison says coronavirus welfare payments must be wound down.
Scott Morrison says coronavirus welfare payments must be wound down.

Scott Morrison insists coronavirus welfare payments must be wound down, even as multiple reports warn that looming cuts will wipe billions of dollars in spending from the economy.

The prime minister says pandemic-boosted JobSeeker unemployment benefits and JobKeeper wage subsidies cannot continue indefinitely.

"These things can't go off into the never never and they have to be wound down," he said on Thursday.

"We have to move on from them."

Treasury expects the number of people on JobKeeper subsidies to reduce at the end of next week, when some companies are kicked off the scheme because they no longer meet business turnover-reduction tests.

Department officials are also predicting an increase in the number of JobSeeker recipients.

This is because the subsidy scheme is being split in two, separating full-time from part-time workers.

Some part-time workers will be able to apply for both JobKeeper and JobSeeker payments.

Almost $55 billion has been paid out in JobKeeper subsidies.

A new report by the McKell Institute has found cutting the payments will strip almost $10 billion from the economy before Christmas.

The institute found 1.05 million part-time workers would have their $1500 fortnightly JobKeeper payments reduced to $750 from September 29.

Another 2.4 million full-time workers would have their payments cut to $1200.

The institute found the Commonwealth would spend $1.52 billion less on JobKeeper per fortnight than if the original rate remained, representing a $9.9 billion reduction in fiscal support by Christmas.

The OECD has released a separate report warning against "premature budgetary tightening" when economies are still fragile.

Shadow treasurer Jim Chalmers said it was too soon to wind back coronavirus supports.

"During the deepest recession in almost a century and an escalating jobs crisis, it makes no sense for the Morrison government to be withdrawing support from the economy without a comprehensive jobs plan to replace it," he told AAP.

Australia's unemployment rate dropped to 6.8 per cent in August, but about one million people are still looking for work.

Mr Morrison told reporters the "effective rate" of unemployment still remained well over 10 per cent and the government wanted to see that come down.

"We've made difficult but balanced decisions which means on health and jobs and the economy we are doing better than almost every other developed economy in the world," he said.

Even still, the Morrison government plans to slash pandemic-boosted JobSeeker benefits by $300 at the end of next week.

The payment is due to go back to the original Newstart allowance of $40 a day in December.

"Clearly in and of itself that will take some income out of the economy - that is undisputed," Treasury deputy secretary Luke Yeaman told a parliamentary committee on Thursday.

More than $12.3 billion has been spent on coronavirus supplements to help jobseekers and other welfare recipients cope with the fallout.

Deloitte Access Economics analysis commissioned by the Australian Council of Social Service has found cuts to the top-up payments will cost the economy $31 billion.

Deloitte also found 145,000 full-time jobs could be lost if JobSeeker is cut, fuelled by a plunge in consumer spending.

Australian Associated Press