'A severe economic crunch': The Australian government is being urged not to turn off the JobKeeper tap in September

Australian workers and businesses aren’t out of the woods yet. (Chris Putnam, Barcroft Media via Getty Images)
  • JobKeeper should remain beyond its September cutoff date, think tank The Grattan Institute has urged.
  • In a 122-page report, it cautioned the government from going down the path of cutting support programs, including JobKeeper, JobSeeker and rental assistance, too early.
  • Instead, it advised that JobKeeper should be expanded to include temporary migrants, short-term casuals, and unis, while JobSeeker payments should be lifted permanently.
  • Visit Business Insider Australia’s homepage for more stories.

Crucial support for Australian workers is under threat as the government considers giving JobKeeper the chop, the Grattan Institute has warned.

The think tank has urged the Morrison government not to lay waste to the wage subsidy program in September when its six-month mandate ends.

“Extend JobKeeper for 3 months for businesses still in strife, end it early for those no longer in need, pay in advance, [and] include temporary migrants, short-term casuals, and unis,” the Institute wrote.

The 122-page report titled ‘The Recovery Book’ was co-authored by CEO John Daley and six directors in charge of budget policy, household finances, and others. In it, the Institute cautions the economy is in need of more stimulus, not less, and advised the spending of up to an additional $90 billion may be necessary in the face of “a globally synchronised deep recession”.

“Governments have cushioned the impacts with more than $160 billion of spending, to support businesses and households. But many of these programs are due to roll off together at the end of September. To avoid a severe economic crunch, they should be wound down more gradually in a package that will cost about $30 billion in 2020-21.”

If it were to be cut in September, the JobKeeper program’s finish would coincide with the end of the banks’ six-month freeze on $176 billion worth of mortgages, providing a significant shock to consumers.

As well as JobKeeper, Grattan advises other measures that need to gradual in their winding back include the suspension of the usual rules for tenancy and insolvency, in order to minimise “the long-term economic damage”.

It also recommended JobSeeker payments be permanently raised, instead of falling back to the much-criticised Newstart levels, along with rental assistance and childcare, estimating its cost at $21 billion over two years.

Such stimulus would continue to help lift consumer confidence and spending, Grattan reasons, enabling an economic recovery.

“If governments want to get unemployment back down to 5% or below by mid-2022 then they will need to be prepared to add to the temporary stimulus by spending another $20-to-$40 billion on services, infrastructure, and building social housing, depending on how the economic recovery plays out.”

It comes just days after data showed the Australian labour force continues to shrink under the strain of its first recession in 30 years.

More too should be done to overhaul transportation in cities in the COVID-19 era to encourage small cars and cyclists, Grattan notes, without increasing new infrastructure spending. Meanwhile, telehealth and remote learning should remain priorities without a “snapback” to the old healthcare and education system.

While it encourages the government to support slow-to-recover sectors, its analysis concluded – much like the Prime Minister himself – that some businesses would inevitably fail. Some should simply be allowed to collapse as part of structural change, Grattan argues.

“Governments should let businesses close if they lack a sustainable future, and avoid bailouts unless necessary to underpin capacity in a vital industry,” it wrote.

This recommendation at least seems consistent with the government’s stance thus far, with the Morrison government’s insistence Virgin Australia find a “market solution” bearing fruit last week as Bain Capital agreed to buy the airline.

But while individual businesses shouldn’t be bailed out, there remain sectors that absolutely require ongoing support beyond September, Grattan said.

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