JobKeeper: Treasury considers monthly eligibility tests, as Grattan Institute pushes for an overhaul

JobKeeper

Prime Minister Scott Morrison. PHOTO: AAP/Mick Tsikas.

The chorus of business advocates, unions, politicians and economists calling for the Morrison government to expand the JobKeeper program has grown over the weekend, with a new Grattan Institute report finding additional fiscal stimulus should be deployed now to curb growing unemployment.

The report came after News.com.au revealed on Friday that Treasury was canvassing a new monthly JobKeeper turnover test as part of its ongoing review of the $70 billion wage-subsidy scheme, which is widely expected to re-target payments to vulnerable industries.

Under current rules, firms only need to prove their turnover eligibility once, by showing that sales have fallen 30% or more against a suitable comparable period. But participating businesses have been providing the Australian Taxation Office (ATO) with monthly revenue projections as a feature of the current program.

Treasurer Josh Frydenberg will hand down changes to JobKeeper on July 23 amid sustained pressure from interest groups across the economy for the payments to be tapered off rather than ended abruptly.

In a report published on Monday, the think-tank argues the federal government should drop an extra $70-$90 billion into the economy to help Australia recover from a likely COVID-19 recession, including by extending JobKeeper for struggling firms.

Grattan has warned a premature pullback of fiscal support could scupper Australia’s recovery from the coronavirus, recommending the Morrison government doubles down on both JobKeeper and rent deferrals for businesses in hard-hit industries.

“With the cashflow of most businesses still squeezed, turning off these supports all at once would be a mistake,” Grattan’s report says. “Some can be removed as scheduled, but the JobKeeper program and rental codes should be extended for businesses that face a sustained hit to their revenues.

“The aim should be to preserve businesses that are likely to have a long-term future, and encourage restructuring of those that don’t.”

With firms across most industries still struggling with the impact of government-imposed trading restrictions in May, Grattan says the next six months will be a “high-risk” period for insolvencies, with many SMEs not expected to survive the winter as sales remain skint.

About $65 billion in income support handed out in the September quarter will be withdrawn by the end of October, with more than 900,000 firms to lose $1,500 fortnightly subsidies for each eligible worker on their books.

“Many businesses will face a ‘triple threat’: simultaneous withdrawal of government revenue support, falling demand as income support for households is also withdrawn, and rising costs because loan deferrals and rent relief agreements expire,” Grattan says.

“The government should reconsider these timetables, especially for the businesses whose operations continue to be constrained by social-distancing restrictions.”

How should JobKeeper be changed?

Despite initial commentary the Morrison government was remiss to extend wage subsidies, there appears to be growing consensus that some industries, notably tourism and events, will still need to be propped up in some way past September.

Last Friday, Prime Minister Scott Morrison said additional support would be extended to those industries still struggling with restrictions, such as tourism-reliant firms unable to take bookings from international travellers.

“As I assured, whether it be Qantas or those in the entertainment sector or the tourism, hospitality sector or regions like North Queensland, we get it, we understand that they are going to be hurting more for longer than other parts of the economy,” Morrison said.

However, it’s still not clear what type of support the government will consider. While federal MP Warren Entsch has pushed for JobKeeper to be extended past September for tourism-reliant firms, tourism Minister Simon Birmingham has floated domestic travel incentives.

Earlier this month, the Morrison government moved to pull about 120,000 childcare workers off JobKeeper from July 12, replacing it with a $708 million support package it argued was better targeted to the industry’s needs.

Grattan has called for an overhaul of the wage-subsidy scheme, which it says has been a success despite being developed quickly during an emergency.

It wants short-term casuals, temporary migrants and university workers to be eligible for the wage payments, echoing calls from the Labor opposition.

The think-tank says JobKeeper should be reshaped, with businesses in vulnerable industries keeping the payments for three months after September, while businesses in recovering areas are pulled off.

A part-time rate could also be introduced to replace the current $1,500 flat-rate payment, which has in many cases significantly increased the pay packets of those working fewer hours, Grattan argues.

“Employees working less than 20 hours a week could receive $800 a fortnight. The saving would be about $2 billion on the cost of JobKeeper per quarter,” Grattan says.

The Morrison government should also change how payments are made to businesses, Grattan says, noting the requirement to pay in advance has created cashflow issues for many businesses.

“JobKeeper payments remain in arrears, so many businesses need to borrow on an ongoing basis to fund their payroll,” Grattan says. “Given it is now known how much will need to be paid for businesses that are in the scheme, it would be very easy to switch to payment in advance by paying double with the next payment.”

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