- Treasurer Josh Frydenberg will hand down his budget update this week, the first real indiction of where the economy is at after the May federal budget was scrapped.
- In it, Frydenberg will announce the new support measures the Morrison governent will implement as part of its second response to the COVID-19 crisis.
- It’s expected the government will taper JobKeeper payments, expand its loan program to small and medium business and cut the $550 JobSeeker supplement.
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With more than a $100 billion of support measures to expire in September, the federal government is readying their replacements.
Treasurer Josh Frydenberg will formally announce new and modified support measures on Thursday, during the budget update after the May federal budget was canned.
With the programs to make up Australia’s second economic response to combat the recession, the Morrison government has already begun previewing its revamped artillery.
While not exhaustive, this is what’s expected to be confirmed in Frydenberg’s address.
JobKeeper will likely be extended, but not as a flat payment
After much urging from economists, the cornerstone JobKeeper program looks set to stay but in a significantly different form. Rather than existing as a flat $1,500 wage subsidy, it will be tapered down relative to how a business is actually faring on a tiered basis.
Rushing to get stimulus out into the economy early in the crisis, Prime Minister Scott Morrison has acknowledged previously the measure would need tinkering after September.
“We put these arrangements in place for six months to give us this time. We put our supports in place, income supports, JobKeeper and JobSeeker, and we put that in for six months so we would have that time to properly move for the next step, to change gears again,” he told media last month.
While small and medium businesses only needed to show a one-off 30% reduction in turnover to originally qualify for six months of subsidies, it’s expected they will now be assessed continually.
As a result, JobKeeper payments will become more needs-based as businesses and sectors reopen at different rates.
The government’s small business loan program will be expanded
In lieu of JobKeeper payments, the government will boost its $40 billion ‘SME Guarantee Scheme’ which offers cheap loans to keep businesses afloat.
Five-year loans of up to $1 million will replace three-year ones of up to $250,000. The first six months will remain interest-free, but the eligibility requirements will be expanded to include new investment.
In effect, the scheme will now expand its focus to get businesses growing, rather than just surviving, as the government looks to a second phase of coronavirus relief.
However, it’s unclear how many businesses will be confident enough to take on debt during the crisis. Under the first iteration, a little more than 15,000 loans worth $1.5 billion were administered.
With Australia seeing a second spike in infections, those businesses confident of growth may be limited.
JobSeeker payments look set to be cut back to Newstart levels
In March, the coronavirus managed to break the Coalition government’s long-held stance on not raising the rate of the unemployment allowance. With the economy teetering, the federal government finally lifted the payment after it had effectively stagnated for two decades.
While the $550 fortnightly ‘Coronavirus Supplement’ payment brought the rate to $1,115, it looks to again be headed for the chopping block despite the protests of welfare groups.
“The Supplement is unlocking poverty for these families and many others as well as protecting those who have become newly unemployed from falling into poverty,” Anti-Poverty Week executive director Toni Wren said, noting studies showed the “vast majority” are spending the money on groceries and other essentials.
“At least one million children will suffer if their parents lose this support when it is due to cease.”
The government’s messaging in recent weeks have suggested that the heightened payments disincentivise Australians to find work. However, the latest unemployment figures would suggest the economy remains a far larger impediment, which simply isn’t creating enough jobs to bring unemployment down.
With unemployment expected to remain about 8% for at least another 18 months, hundreds of thousands of out of work Australians won’t have a choice.
Cutting the supplement, and effectively taking $663 million out of people’s pockets, won’t help change that.