Prime Minister Scott Morrison and Treasurer Josh Frydenberg have looked to head off the September “cliff” predicted to force the closure of 10% of Australian businesses by extending the JobKeeper program for another six months at a cost of $16.6 billion.
Under the new two-tiered system, workers on the full-time rate will get $1,200 per fortnight, and $750 on the part-time rate from September to January.
This will drop to $1,000 per week for full-time workers and $650 for part-time workers from January to March.
Businessmen and not-for-profits will have to demonstrate that they have suffered an ongoing significant decline in turnover to claim the payment.
As a result, the Government says it expects the number of Australians accessing the scheme to drop to 1.4 million in the December quarter and 1 million in the March quarter of 2021.
But the extension brings the total cost of the program to $86 billion – on top of a further $120 billion the Government has already allocated to the country’s coronavirus response and economic recovery.
The continued funding delivers certainty to many businesses impacted by COVID.
You must ask however: what will be the impact of this spending on the Budget?
The Australian’s Contributing Economics Editor, Judith Sloan (pictured), appeared on Sky News prior to the announcement warning of an “incredibly ugly” Budget deficit in the second wave of coronavirus cases in Victoria and NSW as the country’s two largest economies.
While Ms Sloan said the incentives were very important, she estimated the Budget will take a hit of between $150 and $200 billion as GDP and wages hit negative growth and unemployment climbs to 13%.
As one prominent banker said to us, the increase in budget required by the aged care sector is simply a ‘rounding up’ exercise in the Budget.
Given the profile that aged care has now received out of COVID, the Government may be more inclined to support it.
