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Government Considering Slashing JobKeeper Payment Early

Government considering slashing JobKeeper payment early

The government is considering cutting the JobKeeper payment early because of fears it’s creating “zombie” companies.

Deloitte’s Chris Richardson told the wage subsidy is putting businesses on life-support that will disappear as soon as it’s removed.

As a result, workers will end up on unemployment benefits.

“One pandemic is enough for a lifetime and there is a risk that JobKeeper, as a measure designed to preserve jobs, could eventually create ‘zombie firms’ that neither fully recover but don’t go bankrupt.

“This would slow the broader recovery.”

Government considering slashing wage subsidy

The government is now considering options to end the JobKeeper one-size-fits-all approach.

Currently, $1,500 a fortnight is paid to each employee regardless of the size of the business, or whether workers are:

  • part-time
  • or casual
  • and previously earned less.

JobKeeper will end on 27 September, however new options under consideration include:

  • reducing the $1,500 subsidy,
  • targeting it at smaller businesses,
  • or limiting it to particular industries hardest hit by the coronavirus lockdown.

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JobKeeper costing less than forecast

JobKeeper is currently running $20 billion under budget as a result of fewer employers signing up to the scheme.

One change being considered is offering less for part-time workers, instead of the same flat-rate for all.

Another option involves redesigning the scheme to cover 80 percent of wage costs to bring it more in line with Boris Johnson’s wage subsidy scheme.

Scott Morrison also flagged winding back the $550-a-week JobSeeker payment.

“The JobKeeper and the JobSeeker program, as you note, have a legislative life which was set out over a six-month time frame,’’ he said.

Phase out JobKeeper

However, Chris Richardson warns against any sudden cut offs, telling

“JobKeeper should be phased out rather than cut out. And ditto the increase in the unemployment benefit seen in JobSeeker.

“There may also need to be a scaled-down wage subsidy for some small businesses in the six months after JobKeeper is phased out.

“Where a one-size-fits-all approach on the way into economic hibernation worked well, one size will not fit as well on the way out.

“Supports that create a sustainable reopening pathway will be complex, because the impacts are complex and non-uniform.”

Full steam ahead and damn the debt

Deloitte is also warning the economy will not “snap back” as the Prime Minister has predicted.

Rather, Chris Richardson believes it’s likely to remain above pre-crisis levels until late 2024:

“Yes, budgets should eventually return to normal once life returns to normal.

“But that will take time, and there are urgent tasks ahead.

“Until then, federal and state governments should be in ‘kitchen sink’ mode.

“Full steam ahead, and damn the debt.”

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