The $90 billion JobKeeper wage subsidy ended yesterday.
Regular readers will know that I was Luke warm on this scheme from the outset. While I agreed wholeheartedly that generous emergency income support was needed at the beginning of the coronavirus pandemic to stave-off a depression, I instead argued for a $1500 temporary three-month universal basic income to be paid to every Australian taxpayer and welfare recipient. This, I argued, was far simpler than JobKeeper and other stimulus payments, treated everybody the same, and thus avoided ‘picking winners’ and leaving losers.
Instead we got JobKeeper – the $1,500 per worker wage subsidy that was paid to almost any business that suffered a 30% reduction in turnover. Like flies to honey, this payment was easily manipulated by many businesses that adjusted their turnover to qualify.
Unlike New Zealand, there is no public database showing which companies received what. There are also no obligations for companies that experienced rising profits to pay the funds back. Terry McCrann sums up the situation nicely:
…more than $77bn went to the ‘smaller end of town’ [i.e. outside the ASX 300]. We don’t have the faintest idea who they were and nobody seems particularly interested in finding out.
I should add that the ‘smaller end of town’ didn’t only get that $77bn-plus, but another $32bn under a different program [the Cashflow Boost]. All up the ‘smaller end of town got over $110bn…
Clearly JobKeeper and that other program – a straight cash handout to boost cash flows of SMEs – turned into a literal and extraordinarily lavish fiscal free lunch.
The upshot is that the $90 billion JobKeeper wage subsidy, combined with the $34 billion Cashflow Boost, drove one of the biggest corporate profit booms in the nation’s history despite Australia experiencing its sharpest economic downturn since the 1930s Great Depression:
Emergency income support was definitely needed at the beginning of the pandemic. And in this regard, the Morrison’s Government’s various stimulus packages worked. The proof is in Australia’s V-shaped economic recovery.
However, this does not excuse the lack of transparency and poor design of schemes like JobKeeper and the Cashflow Boost, which together lavished $120 billion-plus on corporate Australia without any strings attached nor transparency surrounding which companies received what.
So while unemployed Australians are routinely subjected to crushing mutual obligations to receive stingy amounts of income support, Australia’s corporate sector was handed a giant free lunch.