How business lobbyists drove $40b in JobKeeper waste

Callum Foote and Michael West have made explosive allegations that the business lobby pressured the federal government not to amend JobKeeper when it was discovered by Treasury three months in that billions was being paid to companies with neutral or rising turnover.

Accordingly, the federal government kept the fiscal tap wide open, showering businesses with billions of dollars more free tax funds:

It turns out that the foxes were advising the farmer on the henhouse; and when the henhouse broke, it appears they advised the farmer not to fix it. The result was Treasurer Josh Frydenberg squandered $40 billion in the biggest transfer of wealth yet from Australian taxpayers to large corporations in history.

Documents filed this week show the Federal Treasury knew its JobKeeper scheme was being rorted three months into the Pandemic yet, counselled by big business lobbyists in regular fortnightly meetings, they allowed the rorts to continue.

From Treasury’s response to Questions on Notice:

“Since the start of the pandemic, the Treasury has engaged regularly with business to understand the impact of the pandemic and to inform the Government’s policy making. This includes fortnightly meetings with the business peaks, and regular meetings with other key business representatives”.

Michael West Media has called around the business lobby groups to ask them about their advice but none have yet proffered a meaningful response.

There were three key flaws in the scheme, flaws which led to a record bonanza in corporate profits, payouts to shareholders, both offshore and domestic, and executive bonuses:

  • There was no “clawback” mechanism in JobKeeper which ensured subsidies would be paid back by those rorting it,
  • Subsidiaries of multinational companies were allowed to claim it,
  • The list of JobKeeper recipients was kept a secret from the start, and remains a secret, in contrast to similar corporate welfare schemes in New Zealand, the US and elsewhere.

Despite calls by the Greens, independents in Parliament led by Rex Patrick, and Labor led by Andrew Leigh, the Coalition remains staunchly in favour of secrecy; as do the lobby groups Business Council of Australia and AI Group, who advocated that the design flaws not be fixed, even when Treasury became aware the scheme was being rorted from pillar to post.

The conflicts of interest are staggering. It is now Australian corporate folklore that billionaire ragtrader Solly Lew broke down in tears when begging Josh Frydenberg to intervene and prop up businesses early in the Pandemic.

Yet, unlike Lew, the BCA and AI endlessly parade in the press their “policy leadership”, their research purpose to create a “better Australia”.

Led by the ubiquitous Jennifer Westacott, the BCA is the nation’s most powerful business lobby but, paradoxically, the majority of its 140 members control the largest companies in the world operating in Australia. The majority of its members are either entirely or majority controlled by foreign shareholders.

This perhaps explains why the subsidiaries of profitable multinational corporations were permitted to claim JobKeeper….

It’s a terrific article that I commend you read in full.

I have two major issues with the way JobKeeper was administered by the Morrison Government.

First, the Australian Treasury knew in June 2020 that 157,650 firms with rising turnover had received a whopping $4.61 billion in JobKeeper funds. Yet it kept JobKeeper eligibility unchanged and hosed an additional $9.2 billion of taxpayer money on companies with rising turnover over the following three months:

This alone is inexcusable. After acknowledging a major flaw in the scheme, why didn’t the Australian Treasury or Morrison Government seek to fix it?

Second, and related to the above, why wasn’t there any sort of claw back mechanism implemented – if not at the beginning, after the three month review? This would have prevented many billions being wasted on firms with rising turnover.

Claw back mechanisms are common practice for welfare – just ask any Centrelink client. So why not businesses too?

No amount of spin and obfuscation can deny Treasury’s and the Morrison Government’s grave oversight and waste.

Unconventional Economist
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