As Australia moves towards , the future of the government’s unprecedented $130 billion wage subsidy package is back in the spotlight.
The $1500-a-fortnight JobKeeper payment was initially set to run for six months, ending on 27 September, with the aim of supporting businesses to keep staff on the books during the COVID-19 pandemic.
But with Prime Minister Scott Morrison seeking to have the economy back up and running by July, questions have been raised over whether the scheme should be revised to better support industries hardest hit by the crisis.
Economists say it is too soon to predict what economic policy will be needed in the months ahead, with the “recovery phase” of the crisis still in its early days.
“We’re not going to know the answer to what now for economic policy until things evolve a bit,” Australian National University economics Professor Bruce Chapman said.
“There’s no doubt that the social distancing relaxation will mean much more economic activity than there has been … [but] I think it’s very unlikely that will mean the world looks anything like normal by the time the JobKeeper is supposed to finish.”
Budget policy director at the Grattan Institute, Danielle Wood, also said many businesses would still be feeling the effects of the COVID-19 crisis once they reopened.
“We’re a long way from business as usual in the economy."
In response to a that the government was considering winding up the scheme earlier than planned given Australia's success in controlling the coronavirus, Mr Morrison said on Monday it was “premature” to consider changing the plan.
“We are six weeks into a six-month program," he told reporters in Canberra.
“The impact of the virus, how it will impact on Australia in the months ahead, with a reopening of the economy, is very much a work in progress.
“That's why we put this six-month lifeline in place. What we need to ensure is that ... whatever supports we have they are targeted.”
He also said the economic burden on future generations was at the front of the government's mind.
"It's not just today's taxpayers, it's tomorrow's taxpayers as well," he said.
Professor Chapman said it was this issue that is the key dilemma for the government.
“To keep JobKeeper costs future taxpayers very large sums of money, but to not keep it could mean some businesses are back in trouble,” he said.
The federal government on Friday announced a three-step roadmap which would allow all businesses to reopen within two months, with government estimating this will result in 325,000 people back in work.
Mr Morrison has consistently said the JobKeeper scheme was a temporary measure in response to the unprecedented pandemic, and the priority was getting people back in full-time employment.
A review of the scheme was pre-planned for June, which will allow the government an opportunity to reconsider the scheme, which is the largest of its kind in Australia's history.
HECS-style loans proposed
Concerns have also been raised over whether the planned September end date will be too early for some businesses, leaving them without a vital lifeline.
Opposition Leader Anthony Albanese has questioned Mr Morrison’s belief that the economy will “snap back” once restrictions are lifted and has .
"I certainly don't believe the hard deadlines that are there right now are going to be able to continue,” Labor's industrial relations spokesperson Tony Burke said on Sunday.
Professor Chapman, who was instrumental in designing the Higher Education Contribution Scheme (HECS), said a similar system could be used to ease businesses still in financial distress off JobKeeper payments.
In this scenario, businesses could apply for payments similar to, or slightly less than, the JobKeeper subsidy but on the agreement that the money would be paid back as a proportion of their future earnings.
Using a method like this, Professor Chapman said the debt would likely be paid back within three or four years.
“That’s the kind of plan the government should be thinking about,” he said, adding that it would be dependent on what happens over the next few months.
Ms Wood, who is also the national president of the Economic Society of Australia, said some form of “phasing out” of the JobKeeper scheme and other government income support was needed to avoid a “big shock” to the economy.
“You’ve got basically $120 billion worth of government income support being pumped into the economy in the September quarter, 25 per cent of GDP probably during that period, all of which is gone by the end of October,” she said.
“So something to smooth that transition makes a lot of sense.”
The JobKeeper scheme should not be extended for all businesses, she said, but focused on sectors which have been unable to recover due to continuing restrictions. She was also hesitant to support a HECS-style loan system which would put the financial burden on businesses.
“In a world where a lot of businesses are still hurting because of social distancing restrictions imposed by the government, I think there’s a strong argument that society collectively bears that cost because we are asking businesses to bear that cost on behalf of society for health reasons,” she said.
“A lot of businesses will already be coming out of this with substantially more debt than when they went in with and HECS-style loans would add to that cost.”
The government expected six million workers would receive the JobKeeper payment when it was announced at the beginning of Australia's crisis, but as of last week, only approximately 768,000 businesses had signed up, of which about 40 per cent were sole traders.
Ms Wood said it was likely a number of businesses who were waiting for the scheme to become operational would still be signing up in the coming weeks.
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