A Treasury review of the $70 billion JobKeeper program will be handed down in July as the Morrison government considers whether to curtail the quantum of the $1,500 fortnightly wage subsidies.
Treasurer Josh Frydenberg says he will wait for national cabinet’s three-stage reopening plan to finalise in July before delivering a verdict on JobKeeper.
“That should allow us to get a better sense of where the economy is at that point in time,” Frydenberg said.
The latest timeline comes hours after official figures revealed gross domestic product (GDP) fell 0.3% in the March quarter, setting Australia up for its first recession in 29 years.
While the economy is yet to record its second consecutive quarter of GDP contraction — the widely agreed definition of a recession — Frydenberg nevertheless called time on Australia’s world-leading growth streak, saying modelling showed we are already there.
In other words, the Treasurer says the worst is yet to come.
Treasury is already forecasting the unemployment rate to move past 10% in the June quarter, which captures the bulk of the coronavirus lockdown period in April and May.
A recession has been widely expected in the wake of the COVID-19 pandemic, forcing large swathes of the economy to curtail their operations or shut down entirely from March.
But the March quarter figures also reflect the economic pain felt during the bushfire crisis in January, particularly for the tourism, accommodation and food services industries.
Consumer spending and private sector demand fell 1.1% over the March quarter, while business investment was down 0.8% — these factors drove the GDP contraction, offsetting a 1.4% rise in public sector spending.
It was the first time GDP fell in the March quarter since 2011, and the 1.4% year-on-year increase was the slowest since September 2009 amid the global financial crisis.
How the Australian economy recovers from the pandemic will inform how the Morrison government varies its wage subsidy scheme, which is the largest single fiscal support program currently on offer.
Treasury had initially forecast more than 6.5 million workers would be covered by the scheme at a cost of $130 billion, but has since revised this estimate to $70 billion and about 3.5 million workers.