Hindsight is a beautiful thing, gifted frequently to opposition parties, armchair critics and newspaper columnists, but never to policymakers in the grips of an actual crisis. With lockdowns easing, it’s a good time to look back and assess the legacy of the Morrison government’s budgetary response to the coronavirus, which, in my view, has been exemplary.
Overall, the federal government acted with breathtaking speed to introduce supports to buttress our economy, including the historic JobKeeper wage subsidy scheme, one-off cash payments, other business support measures and boosted welfare supplements.
Centrelink queues spiked during the early days of the pandemic but JobKeeper helped keep a lid on unemployment.Credit:Chris Hopkins/Graph
Treasury quickly flexed its muscle memory from the global financial crisis about the need to “go early, go hard, go households” – an insight gleaned, in turn, from policy failures during the early 1990s recession.
JobKeeper, in particular, has since come in for fierce criticism – mainly from Labor – that it should have included a so-called “clawback” mechanism to ensure money did not go to firms which did not suffer the anticipated 30 per cent decline in turnover they were supposed to “reasonably expect” to be eligible for the scheme. Alternatively, it is argued, firms should have been tested more regularly during the first six months to ensure actual turnover declines matched anticipated declines.
Not so, argues a Treasury paper released on Monday. It argues a more stringent and closely monitored eligibility test would have given some firms an incentive to “game the system” by reducing their actual turnover to remain eligible. This would have dampened economic activity – the precise opposite of the scheme’s intent.
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Treasury also refutes the idea JobKeeper payments were a “waste” in cases where they were paid to firms that did not suffer a 30 per cent fall in revenue – or, indeed, whose turnover actually increased. This was not, as it turns out, uncommon.
According to Treasury’s figures for the scheme’s first six months, $13.2 billion of taxpayer dollars went to businesses whose turnover did fall, but by less than 30 per cent. A further $13.8 billion was paid to businesses whose turnover increased compared with a year earlier.
Indeed, the median firm that received JobKeeper – remember that’s the firm standing in the middle, if you lined them all up in a row – suffered a decline of 28 per cent in turnover over the year to the June quarter 2020. For the September quarter, the median decline was 23 per cent.
