1. Unemployment rates were temporarily raised during 2020, from $565.70 per fortnight to $1115.70 per fortnight before falling back to $815.70 per fortnight in late 2020 as the coronavirus supplement of $550 per fortnight was reduced (from $550 per fortnight to $250 per fortnight).
2. This is because the unemployment benefit has only increased in line with increases in the CPI whereas other incomes have increased over the same period by more than increases in the CPI.
3. This can occur because higher unemployment benefits can create disincentives for those in receipt of benefits to actually supply their labour in the labour market. This can exacerbate any shortages that may exist in some labour markets (such as the market for fruit pickers) as the supply curve in these labour markets shift to the left. Businesses in need of labour that is in short supply are therefore likely to increase wage rates in order to attract labour, adding to costs of production and making some businesses less willing to supply in product markets, leading to a reduction in both aggregate supply and productive capacity,
4. This occurs because unemployment benefits that are too low create conditions for the unemployed that make it difficult to find employment. This includes insufficient funds to afford basic accommodation, clothing, transportation and other personal services (e.g. products or services related personal grooming, such as haircuts) that would be considered necessary or important to successfully gain employment. Essentially, unemployment benefits that are too low run the risk of forcing some people into a cycle of poverty and disadvantage where the chances of gaining employment fall over time.
5. This is because there at least some guarantee that some of the money is spent on improving the skills of the unemployed. This will then help to improve the overall quality of human capital and lead to an increase in labour productivity, reducing average costs of production and making businesses more willing to supply in product markets, leading to a rise in both aggregate supply and productive capacity.