Thanks to Treasury’s $60 billion JobKeeper overestimate, we’ve all just been given a lesson in policymaking on the run. Fortunately, it’s one that gives the government more options for managing the economic recovery from lockdown, not fewer.
Despite everything you’ve read and heard in the media — even good journalists and Coalition cheerleaders misreported this — there was no $60 billion “blunder” about JobKeeper. If you read the (poorly worded and structured) Treasury media release, you’ll see why.
The revised cost of JobKeeper to $70 billion has nothing to do with the error by 1000 or so businesses filling out the form (which suggests a badly-designed form) but rather:
…partly reflects the level and impact of health restrictions not having been as severe as expected and their imposition not having been maintained for as long as expected at the time. This has been reflected in some improvement to the outlook for the economy since the original estimate was developed as a consequence of these and other factors. The variation in estimates also reflects the inherent uncertainty associated with estimating the take‑up of a demand driven program in the current circumstances.
That is, JobKeeper was crafted when the government was assuming an extended lockdown, a large death toll and lots of pressure on the health system. Fortunately, we’ve come through the worst of it relatively quickly, so the number of businesses that have been affected to the extent that they become eligible for JobKeeper is much smaller.
Why Treasury left that to the bottom of the media release, and opened its statement with clerical errors by applicants, is anyone’s guess, but it led people to connect the overestimate of affected employees to the overestimate of the program cost, when the two are unrelated. Labor is having a field day with the blatant lie that it’s all some kind of “blunder”.
Bear in mind how quickly JobKeeper was put together. The government went from mocking wage subsidies to embracing them in less than a week, announcing the JobKeeper package on March 30. That was just eight days after the second stimulus package and 18 days after the first. And the criticism of the government at that point wasn’t that it wasn’t getting the details right, it was that it was taking too long to intervene. No one was too fussed about the program details when we seemed on the verge of an economic catastrophe.
Now, the government is being bagged because it didn’t get the details right. Well, you can’t have it both ways. It turns out, you really do need time to develop a colossal economic support program properly.
What the overestimate suggests, though, isn’t merely that the lockdown was shorter and less intensive than expected, but that some of the hard limits on accessibility to JobKeeper weren’t appropriate — in particular, the 30% revenue reduction threshold for smaller firms and 50% for bigger ones; the prohibition of long-term casuals attached to a business for less than a year; the effective ban on universities.
In designing any demand-driven program, you have to set thresholds for eligibility. Where they end up is part ideology, part sensible management, part design to fit an arbitrary funding allocation. And they interact with your basic assumptions.
If JobKeeper had been designed for a shorter lockdown period, the eligibility thresholds could have been more generous.
Businesses that incurred very large revenue losses but fell short of the 30% or 50% thresholds could have received assistance they aren’t currently receiving — which is particularly unfair given some very large companies have been able to arrange their affairs in order to access JobKeeper.
Long-term casuals who have only been working with a current employer for nine months could have been eligible.
The treatment of universities seems to have been outright vindictive, given the government is now bending the rules to allow its ideological fellow-travellers in the private university sector to access JobKeeper. Having failed to properly fund universities and instead encouraged them to rely on foreign student income (some recklessly so) the government has stood by and done nothing as foreign student income collapsed — beyond telling foreign students to go home.
The government, naturally, is now under pressure to adjust its JobKeeper thresholds to help those who are currently missing out. Others are urging it to keep its fiscal powder dry until the trajectory of the recovery becomes clearer (or to not spend it at all). It’s something of a false choice — preventing a deeper contraction now will reduce the need for greater stimulus in coming quarters and, to the extent it prevents further damage to consumer and business confidence, might enable a quicker recovery.
However, the overestimate does take a lot of the (self-imposed) pressure off the government to shutter its support programs in September, which threatens to send the recovery off a cliff. Having rushed the introduction of JobKeeper, there’s now less of a need to rush its closure, or to send hundreds of thousands of unemployed people back to the miserable pre-COVID level of unemployment benefits.
Get real, Bernard. This “under-spend” is just par for the course for this mob. Or have you forgotten the Under-spend on the NDIS, or the fact that less than 1/8th of the Bush-fire funds have gone out to those in need? Or the constant under-spending on their Drought & Flood packages.
If you genuinely think this $60bn will be repurposed to helping more of those in need, then you are truly delusional, & need to lay off the Government-brand Kool Aid.
I have heard that the lower uptake by businesses of Jobkeeper is due to some not having funds available to pay their employees upfront, and then await reimbursement some weeks later.
This feature of the Jobkeeper scheme required a huge initial outlay of money, which many businesses did not have.
Apparently, restaurants and cafes with large staff numbers were particularly hard hit.
My physio runs a small business. He had to find $30, 000 which he did not have, just to cover a handful of staff.
Now the Government is using the low uptake to argue that things were not so bad. But they were.
Yes I had worked this out too just from what I read about the way it was going to be paid. I don’t know why this is not being picked up by the media. I imagine that it was a deliberate action to reduce the number of applicants.
Yes SKG I think this is a more likely reason and remember one of the rules was it was one in all in for your eligible employees, you couldn’t select only a couple so as my local cafe owner said suddenly her wage bill was double at time when her income was way down and she would have to borrow some $20k to bankroll payments until jobkeeper reimbursements kicked one. I expect a number of already indebted business owners opted out due to this. The 130 billion dollar estimate was announced well before any forms were wrongly filled in and the better than expected health outcome excuse doesn’t wash either, Jobkeeper was set to run for 6 months costing so much per month. One month in they realised only 3.5 million, not 6 million had signed up so 6 months worth is now only $70 billion. Most small businesses are still shutdown or running at half speed so better than expected control of the virus has no impact on jobkeeper outlays.
I haven’t read or heard any media suggest that the blueprint for JobKeeper bears a distinct resemblance to the sports rorts. I reckon somewhere in the office of PM&C there’s a colour-coded spreadsheet. Here’s how I see it: you need a very simple spreadsheet – 3 columns will probably do it (or even just 2 if you want to further reduce transparency). Colour one red, one blue and one (say) brown (ie largely not white).
The red column is for people who wouldn’t vote libnat in a blind fit, for example the arts sector, and its total is $0 because any grants to them would be a waste of money.
The brown column is for people who aren’t eligible to vote for various reasons relating to nationality and their reasons for being in this country, and its total is $0 because they don’t matter.
The blue column is, of course for all those “small”-ish businesses who certainly vote libnat, and in many cases donate to the party. Their total is 100% of the pot, or grant or rort if you want to call it by its proper name.
That’s JobKeeper.
Great analysis, LT, it not only accords with the outcomes achieved and the prior behaviour by these shameless kleptocrats, it utterly matches my own prejudices!
Everything you have said, Lee, is probably correct.
Have you caught up with Michael Pascoe’s article in The New Daily this morning? I was gob-smacked after reading it…talk about corruption on a grand scale, describing what happened since 2014 with the Community Development Grants from the Feds.
Just another example of corruptly dishing out taxpayer funds to advantage the Coalition through the last two elections, and more in the pipe-line up to 2026. Eleven times larger that #sportsrorts!
This government is truly diabolical!!
Brilliant analysis.
The “blunder” was in those believing a gushing, gullible media?
I reckon there’s potential for the “unaccountability” of this, dwarfing the “profligacy” of the Rudd-Swan GFC stimulus.
This scheme was a blunder, but for slightly different reasons:
1) Weeks before the announcement, many economists had called for such a scheme, and it was being announced overseas. ie there was more time than a few days of panic to properly plan. A blunder in forward thinking/planning
2) When it was announced, I was immediately raised a question. If this was going to reduce unemployment by 5% (Treasury figure – which is around 750,000 jobs). That means that only $14b of the $130 budget was going to actually stop unemployment – what about the other $116b? Most would be going to business by means of reduced employment expense – hardly a “jobkeeper” payment and more of a business stimulus. This does not mean it didn’t have validity – just very misleading.
3) The medical effects have been vastly better than predicted, but that has not changed the economics much. We are still in a state of closure – not too dissimilar to what would have occurred if there had been oodles more cases/death AND, further stimulus was suggested if it had been worse.
4) 700,000 people more people are predicted to be on JobSeeker as a result of C19. ie the stimulus only saved half the jobs that it could have. That is where more stimulus is needed
5) The announcement came before any businesses responded – so the estimate of 6.7m was already there. Add to the fact that they would have (or should have) known that 3/4million would not qualify, and that there are already unemployed millions out of work – thats60% of the work force. Really?? Something did not add up.
It was either a blunder or a deceit.