KPMG welcomes JobKeeper and JobSeeker announcement
For JobKeeper, it makes sense that this wage subsidy program is extended beyond September simply because the economy has not recovered well enough from the initial shock associated with the health policy responses to the coronavirus. Time has enabled government to adopt a more targeted approach to Jobkeeper through the introduction of a two-tier payment structure, plus an acquittal arrangement that ensures support is provided up until a point a business can stand on its own two feet. KPMG recognises that at the start of the pandemic the government simply did not have the luxury of time to tweak the Jobkeeper program so it was optimal for all cases; rather stage 1 of Jobkeeper required a trade-off between timeliness and program features, which we think it got about right under the circumstances.
While there has been a recovery in certain hard-hit sectors – like food & accommodation and arts & recreation – the economy is still weak and virus outbreaks in Victoria and NSW are threatening to delay any sort of rebound, with a knock-on effect on unemployment figures in July. So a further six months of support, albeit reduced, with enhanced targeting based on actual turnover change, is appropriate – extending the program still further would be premature at this stage, as at some point businesses will need to be weaned off JobKeeper as the economy improves, so the government has struck the right balance.
For JobSeeker – in terms of the reduced rate of coronavirus supplement from late September – for years, KPMG has been advocating a rise in the level of Newstart, and the new JobSeeker level is still a healthy rise on that, which is socially and economically justified. But it, combined with the other support benefits provided by government, such as rental assistance, needs to be at an amount lower than the minimum wage so as incentivise people to find employment; otherwise the labour market simply won’t function in the way it should. So there is a fine balance that needs to be achieved when you set unemployment benefits for a society; and the figure announced today seems to me a sensible one. This is reinforced by last week’s ABS Labour Force data* which showed an increase in the numbers of people in jobs in May and June from a low in April even though the overall unemployment rate went up.
*Between the middle of June – which is the period in which last week’s ABS Labour Force Survey is conducted – and the end of June total payroll numbers declined 0.8 percent across Australia; which incorporated a 1 percent fall in Victoria. We know from recent history that it can take several weeks for employment losses to peak following the implementation of stage 3 lockdowns as businesses evaluate the costs and benefits of remaining opening or closing for the duration of the increased quarantine measures.
This means employment is likely to be rolled back to levels similar to the last lockdown, and the associated economic gains that have accrued are also likely to evaporate to a large extent. KPMG’s analysis of Victorian ATO payroll data and the value of the economic output generated on an industry-by-industry basis across the state suggests the gains that have been clawed back from the peak of the downturn (in April) are worth around $2.2bn per quarter and involve about 88,000 jobs. To the extent the lockdown is extended or expanded then the economic losses will be materially more than this amount.