The finance minister Mathias Cormann has indicated the jobkeeper wage subsidy will be extended after September but in a different form, hinting on Sunday it may evolve beyond a single flat payment, and will be targeted to businesses that “genuinely need it”.
Cormann told Sky News the government would use an economic statement this week to move the country sequentially to a “new normal”, recognising that some businesses were starting to recover from the economic shock of the pandemic and some were not.
After the interview, the Victorian government confirmed another 363 Covid-19 cases in the past 24 hours, and mandated the wearing of masks, and New South Wales reported another 18 cases.
“There will be some adjustments to the [jobkeeper] scheme, to make sure it is appropriate for the next phase,” the finance minister said. “The ultimate objective still has to be getting back into a situation where all businesses are in a position to pay for the wages of their employees out of their income.
“When we first designed the scheme back in March, speed was of the essence, simplicity was of the essence. We needed to get the support out into the community, into the economy as swiftly as we could.
“So we accepted the fact that the single payment would result in some people getting more than they otherwise would have under their normal working arrangements.”
Cormann said there was “capacity for us to have a closer look at how we might be able to tweak” some elements of the program.
“Once we get to the end of September it will be a matter of making sure that any ongoing support is appropriately targeted to those businesses who genuinely need it.”
The government will release an economic update on Thursday and outline the future of the jobseeker and jobkeeper payments, which were budgeted until September. It is unclear how long the payments will be extended for, but a skills program unveiled by the government last week contained a wage subsidy for apprenticeships funded until next March.
Ahead of this week’s announcements Labor has signalled it will support retesting businesses to ensure they remain eligible for jobkeeper, better targeting, and tapering the support over a longer period.
The Australian Council of Trade Unions (ACTU) also supports checking business eligibility every quarter. The ACTU president Michelle O’Neil told the ABC on Sunday unions were also comfortable with employers eligible for the jobkeeper payment having some flexibility with labour market regulations to ensure workers remained connected to jobs.
But she said that flexibility should be confined to businesses in trouble because of the coronavirus, not to businesses that were trading more or less normally.
The government has signalled it might bring forward income tax cuts in the budget in October to help boost consumption in the economy, but O’Neil said that wasn’t the right response to the crisis. She said the government needed to reserve fiscal firepower for an “ambitious, big, bold, comprehensive national reconstruction plan”. She said tax cuts would not help workers if they lost their jobs during the recession.
The second phase of tax cuts extend the upper income threshold at which the 19% tax rate applies to $45,000, and at which the 32.5% rate applies from $90,000 to $120,000. The tax cuts are due to take effect from 1 July 2022, but the government has signalled that could change, and Labor has already called for that tranche to be brought forward.
Instead of tax cuts, O’Neil says the government should consider implementing free, universal childcare at a cost of $7bn a year as part of a recovery plan for the economy that would boost female participation in the labour market, and boost growth in the economy. The ACTU plan also includes ongoing wage subsidies for apprentices and a nationwide free TAFE program for priority courses, as well as mandated Australian content in manufacturing and procurement.
The government implemented free childcare during the peak of the first wave, but has withdrawn that support. In making the case for heavily subsidised childcare, a recent report from the progressive thinktank the Australia Institute said if Australia had the same average labour force participation rates as Nordic countries did, then the economy would be $60bn larger – a gain of about 3.2% of gross domestic product.
The small business ombudsman, Kate Carnell, told the Senate’s Covid-19 committee last month that the government’s plan to reintroduce childcare fees from 13 July would have a “significant impact” on small-business owners struggling to get “back up and running” as restrictions ease.
She noted 40% of small businesses were owned by women. “Free childcare was a godsend for them – without it, they will struggle significantly.”
