The Australian Hotels Association is among the latest lobby group demanding wage subsidies beyond the late-March end date for JobKeeper:
“In the last 74 days alone nearly 10 million Australians have been locked down across four CBD areas (in Adelaide, Sydney, Brisbane and Perth). In Perth they still are,” AHA chief executive Stephen Ferguson told The Australian.
“The prospect of more border closures and lockdowns keeps employers all awake at night and their employees…
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“We’ve got to have measures in place that look after the businesses that are forced by public health orders to close down.”
The caravan industry has also joined the scab-grab, calling for tax subsidies:
As the federal government’s jobkeeper subsidy trickles to a stop, a spokesman for the Caravan Industry Association of Australia, Stuart Lamont, has called for more support.
Rather than travel vouchers, he suggested personal tax deductions for accommodation and tours…
“Some sort of incentive in that way, which is tax-related as opposed to just a handout for those people who want to go away on holidays, is a more sustainable model to investigate.”
Sensing the political pressure, the federal government is said to be considering a loan scheme for businesses that have been adversely affected by the COVID-19 pandemic. The proposed scheme is said to be based on the Higher Education Contribution Scheme (HECS), with repayments to begin when a firm’s turnover returns to a certain level:
The Australian has established that Treasury officials have met in the past week with Australian National University professor and former RBA board member Warwick McKibbin and discussed the merits of a HECS-style scheme for struggling businesses.
Professor McKibbin has been a vocal proponent of such a program and proposed a similar measure directly to the Prime Minister in March last year.
“The first time around (in the initial phases of the pandemic) you had to spray money around and some of that was wasted, but this time around you want to do it in a much more targeted way,” he said. “You’ve got to be careful with the selection process, which would mean screening for eligibility by region and sector.”
A HECS-style contingent loans scheme would be far more efficient, targeted and equitable than extending JobKeeper or giving personal tax deductions for travel.
It would provide genuinely struggling businesses with the funds they need to survive without showering funding on undeserving businesses. Moreover, these loans would eventually need to be repaid at a concessional interest rate once incomes recover, thus protecting taxpayers.
That said, a better solution is to permanently raise JobSeeker from its poverty level of $40 a day to the Aged Pension level ($61.50):
This way, taxpayer dollars would go where they are truly needed and displaced workers, regardless of industry, would receive adequate income support.
The impacts of COVID-19 could linger for years. This means affected industries will need to adjust to the new “COVID normal” and not all businesses will remain viable. Extending industry subsidies will merely delay the inevitable and keep unviable businesses alive on taxpayer life support.
Policy makers should facilitate creative destruction in these industries by providing income support to displaced workers, rather than keeping zombie firms afloat. Let the cards fall where they may.