Australia is 'rapidly approaching a cliff'
Scott Morrison is being urged to deliver direct cash cheques for families and to extend JobKeeper for some companies until Christmas to prevent a longer, deeper recession as a second wave of cases hits Victoria.
A shock surge of cases in Victoria is reshaping the debate within the Morrison Government over when to end the $1500 a fortnight wage subsidy, which was due to be expire in late September.
A new report by the Grattan Institute has urged the Prime Minister to inject up to $90 billion into the economy to help it weather the storm of the biggest economic shock since World War II.
That includes an extension of JobKeeper with a new turnover test for some companies until Christmas.
But a new turnover test would apply to ensure companies that have "bounced back" are still kicked off the payments in September.
"JobKeeper was enacted for six months and is scheduled to wrap upon 27 September. But a universal cut-off is blunt,'' the Grattan report warns.
"JobKeeper should be extended for those businesses and employees that are still severely affected by government restrictions.
"Businesses currently receiving JobKeeper should be required to re-test against the turnover requirement at the end of July and September. Where a business's turnover is now better than 20 per cent below pre crisis levels, support should be withdrawn."
Currently, there's a one-off revenue test to qualify for JobKeeper that you must have a 30 per cent downturn in revenue but payments remain in place for six months regardless of whether you bounce back.
On Friday, the Prime Minister said he accepted that many companies currently receiving JobKeeper had already bounced back in terms of revenue.
"I have no doubt that there are many businesses now, fortunately, who have moved back above that threshold. I suspect that's absolutely the case and I certainly hope it is for their sake and their employees.
"But we are working under the arrangements we put in the legislation and will continue to do that for the current phase of that program. In relation to future phases of what we will need to do in terms of aggregate demand stimulus, well, as I've said on numerous occasions, we'll be announcing that in time for the economic statement."
Australia is heading for a cliff where jobs will disappear and incomes slashed unless there is urgent action. Sign our petition demanding the Morrison Govt extend JobKeeper & keep the rate of JobSeeker at the rate it is now w/ the Coronavirus supplement.https://t.co/TgFxcbebin— Australian Unions (@unionsaustralia) June 26, 2020
The Grattan Institute's Recovery Book: What Australian governments should do now also calls for direct cash payments to stimulate the economy rather than bring forward tax cuts.
"The Federal Government should extend direct cash payments to households to boost spending,'' it states.
"Estimates suggest that each dollar of cash payments made to low-income or liquidity-constrained households boosts GDP by between 60 cents and one dollar with more recent estimates being higher.
"And recent evidence shows such payments are effective in boosting spending, thereby supporting employment and economic activity.
Given the collapse in job vacancies and appalling news from @Qantas, it’s time for Morrison & Frydenberg to come clean with the Australian people on our economy’s future given a rapidly approaching cliff – that is, the scheduled wind-back of JobKeeper & JobSeeker. 1/4— Kevin Rudd (@MrKRudd) June 25, 2020
There are fears that the triple whammy of the $1500 a fortnight JobKeeper, the doubled $1100 JobSeeker payment and a mortgage honeymoon for distressed homeowners all ending at the same time in late September could see unemployment spike and a the economy hitting a "fiscal cliff''.
The report also suggests the permanent rate of JobSeeker should be increased by at least $100 a week, and Commonwealth Rent Assistance should be increased by 40 per cent.
"COVID-19 is the biggest social and economic shock since World War II,'' the report states.
"Without further stimulus, unemployment will remain too high and the economy will grow more slowly than it could for many years."
At the weekend, reports emerged the $275-a-week JobSeeker payment, which was temporarily doubled to $550-a-week during the coronavirus pandemic, should be increased by $75 a week from October.
That would deliver a weekly rate of $350-a-week for thousands of people who are expected to lose their jobs when JobKeeper expires in late September.
Labor treasury spokesman Jim Chalmers has accused the Morrison Government of keeping the report a secret until after the Eden-Monaro by-election".
"Businesses are laying off workers because of the uncertainty this is creating," Dr Chalmers said.
"Scott Morrison should release the JobKeeper review immediately, not keep Australians in the dark."
Originally published as Extraordinary cost of nation's virus shock