The number of Aussies on JobKeeper now exceeds 6.3 million, blowing past the Morrison Government’s initial projection of 6 million:
More than 6.3 million people are enrolled for the wage subsidy, already above the 6 million forecast, putting the scheme on track to blow past the $130 billion budgeted cost unless changes are made after a Treasury review due by June.
Some 895,978 entities are registered…
Westpac chief economist Bill Evans said he was “very surprised” more than 6 million people – about half the workforce – were covered by JobKeeper.
“When this scheme ends in September it’s going to be a massive shock to the economy.”
JobKeeper along with the boosted JobSeeker are legislated to end near the end of September. According to the Grattan Institute, “the Government is going to be injecting about $120 billion in support to the economy between July and September — that’s about 25 per cent of GDP”:
Thus, the biggest risk to the economy is that welfare is pulled back too early, collapsing demand and sending the economy into an austerity-led double-dip depression.
The Morrison Government must, therefore, tread very carefully in withdrawing stimulus.
Deloitte offers a sound phase-out of JobKeeper:
Phase JobKeeper out in line with a turnover measure over the short-term and in line with reopening steps. As turnover increases with economic activity, the JobKeeper payment steps down from $1,500 per fortnight to $0 until turnover begins to return to the pre-COVID levels. Just like the turnover drop made them eligible for JobKeeper in the first place, a turnover recovery could make them ineligible.
Or more simply, the payments could be withdrawn slowly from $1,500 a fortnight to lower amounts on succeeding fortnights: to $1,200, then $900, $600 and finally $300 – adding eight weeks and a further $20 billion to its cost – or potentially just using up the already ‘unsubscribed’ amount.
Even more narrowly, the government could take a targeted and more sectoral approach. For instance, it replaced JobKeeper with a $600 a fortnight supplement for just over three months (beyond September) for businesses that fit narrower criteria and have been hit the hardest: 20 workers or fewer, and working in industries such asair transport, food and accommodation and arts and recreation. Such a measure is estimated to cost around $1.5 billion – a much smaller share of the unsubscribed JobKeeper pie, but equally sustaining a much smaller share of the economy.
JobSeeker should also be maintained at its current $1,100 a fortnight level until unemployment falls back to a reasonable level (say 6.0%), and then replaced with a higher payment than existed previously (say $700 a fortnight indexed to weekly earnings).
High-income tax cuts should be jettisoned and replaced with traditional stimulus, including a massive infrastructure/social housing build-out to fill the hole left by lower consumer, business and dwelling investment.
The Morrison Government has done a reasonable job managing the initial emergency. The bigger test will be managing the recovery.