Asia

Australia's A$60 billion wage scheme gaffe prompts calls to extend economic life support

SYDNEY – Unions and small business groups have called on the Australian government to consider extending a scheme to protect the jobs of millions of workers during the Covid-19 pandemic, after an embarrassing disclosure by Treasurer Josh Frydenberg on Friday (May 22) that the government had made a A$60 billion “error” in tallying the cost of the scheme.

The Government revealed that its flagship JobKeeper scheme, which gives employers affected by the downturn A$1,500 a fortnight per employee to keep staff employed, was being used to keep 3.5 million in work, rather than initial claims of 6.5 million.

The higher number was due to paperwork errors by businesses applying for funds, but the mistakes were not picked up because authorities were rushing to process the payments.

The scheme had been expected to cost A$130 billion over six months to the end of September, but will now cost A$70 billion.

“It is welcome news that the impact on the public purse from the program will not be as great as initially estimated,” Mr Frydenberg said.

But the announcement of the mistake added to pressure on the Government to prolong the scheme or to confirm how the nation will survive without it.

Australia has begun ending its Covid-19 lockdowns and preparing for the full reopening of schools and businesses. But the country is now grappling with a potentially larger challenge – how to wind back the handouts and stimulus programs that have prevented the economy from collapsing.

Recent figures showed Australia’s unemployment rate leapt from 5.2 per cent to 6.2 per cent last month. But the rate would be substantially higher if it included jobs supported by the JobKeeper scheme as well as those who have stopped looking for work.

The other major plank of the Government’s efforts to tackle the downturn has been the effective doubling of welfare payments to A$1,110 a fortnight. This, too, is due to end in late September.

Both schemes have been widely credited with restoring consumer and business confidence and keeping people attached to their employers.

Prime Minister Scott Morrison has described the schemes as a “bridge” to help the nation reach an economic recovery phase.

But analysts have expressed concerns that the removal of the support schemes in September now looms as a precarious “cliff” that could lead to an economic collapse.

So far, the Government has insisted it has no plans to extend the schemes.

Describing the A$60 billion error on Friday, Mr Frydenberg said the Government did not plan to use the unspent funds on additional support measures.

“This revision by Treasury is not an invitation to go and spend more,” he said.

Some analysts have suggested keeping the payments beyond September or phasing them out. Others have suggested introducing a student-loan type scheme for employers that would be repaid as an extra tax on their profits.

Economics commentator Ross Gittins said the Government should not rush to end the schemes but should wait until the economy was clearly starting to recover.

“I wouldn’t be withdrawing any support to the jobless before I’d seen actual figures on the extent of the initial recovery,” he wrote in The Sydney Morning Herald. “Withdraw the two key measures too soon and the much feared ‘second wave’ could be economic rather than medical.”

Australia has so far avoided a serious outbreak of Covid-19. There have been 7,095 confirmed cases and 101 deaths. The number of new daily cases has been drastically reduced, with just fifteen new cases on Friday and six on Thursday.

States and territories have quickly begun easing restrictions. New South Wales, the most populous state, allowed bars and restaurants to serve 10 people at a time from last week and yesterday announced the maximum will be lifted to 50 people from June 1.

However, Ms Danielle Wood and Mr Nathan Blane, from The Grattan Institute, a public policy think-tank, suggested the JobKeeper scheme should not be simply abolished but should be wound back slowly as individual businesses recover.

“Targeting support to the firms that need it most in this way would be a better use of taxpayers’ money – and it would help stop the economy falling off a ‘cliff’,” they wrote on The Conversation website.

A Government review of the JobKeeper scheme, due to be completed next month, is expected to consider extending it beyond September. The review will also consider tightening the scheme to make it apply only to particular workers, such as those in hard-hit sectors including hospitality, arts and entertainment.

The Labor Opposition party seized on the Government’s A$60 billion error yesterday to question its capacity to steer the nation across the so-called “bridge”.

“If you can’t get this right, how can you get the economic recovery right?” asked the Opposition leader, Mr Anthony Albanese.

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