International Monetary Fund should ditch JobSeeker, reconsider stage 3 tax cuts

As the government mulls how to provide additional relief for households dealing with increasing cost-of-living pressures, the IMF said Australia should move to a more generous program of support for those out of work.

The IMF said the assistance provided by JobSeeker - currently at 41 per cent of the minimum wage - was so low that during severe shocks like the pandemic it was not enough to sustain demand and help protect the economy.

It has recommended the government adopt a "full-fledged, contribution based unemployment insurance [that] would close a gap in social protection".

There have been growing calls for a substantial increase in JobSeeker payments amid warnings that the low level of benefits is undermining the ability of the unemployed to job hunt effectively and condemning many to poverty.

In the same report, the IMF urged the government to reconsider its controversial stage three income tax cuts, which are estimated to cost $254 billion over 10 years.

"There would be time, if needed, to re-assess the parameters to appropriately balance costs on the budget and benefits to the economy," the IMF said.

But Treasurer Jim Chalmers said the government's policy on the tax cuts "hasn't changed".

"We listen respectfully when those kinds of suggestions are made to us, but the government's approach to this hasn't changed," the Treasurer said.

Opposition treasury spokesman Angus Taylor said the government must honour the stage three tax cuts and the IMF report made clear it needed to rein in its spending.

"You can't tax your way out of a spending problem," Mr Taylor said. "It is critical governments get their tax settings right".

But Australia Institute senior economist Matt Grudnoff said sticking by the tax cuts was a mistake.

Mr Grudnoff said the cuts were so large "you could double Job Seeker rates and still have money left over".

The Australia Institute economist said the IMF's idea to scrap JobSeeker and replace it with an unemployment insurance program was "a good idea if it is going to improve on the really low rates of JobSeeker".

Australia is the only advanced economy without an unemployment insurance program.

While these can take many forms, most involve tax contributions from employers and workers which are used to support people when they are out of a job.

In the United States there is a time limit on such support, and Mr Grudnoff said it was unlikely that Australians would accept such a scheme.

Instead, he suggested a hybrid approach involving an open-ended base payment and a time-bound top-up.

But Australian Council of Social Service chief executive officer Cassandra Goldie said there were "serious concerns" about the idea.

Dr Goldie said the IMF's acknowledgement of the inadequacy of JobSeeker payments was welcome, but argued tying unemployment benefits to paid work was not a solution.

She said such an approach would put people with an illness, disability or some other reason why they were out of the paid workforce for an extended period at a disadvantage.

"We see in Canada, where there is an insurance model, that many people who have insufficient contributions to their unemployment insurance live in poverty on social assistance payments," Dr Goldie said.

Instead, she called for a minimum $73 a day increase in the base rate of JobSeeker and increases to supplementary payments like rent assistance.

The adequacy of JobSeeker assistance is expected to be considered by the government-appointed Economic Inclusion Advisory Committee, which was set up to advise it on reducing disadvantage and boost economic participation.

The committee, which includes politicians, leading economists, social policy experts, unionists and business leaders, is due to report to government two weeks before the May budget.