Westpac: Job losses set to surge despite ‘game-chaging’ JobKeeper payment
About 1.7 million people are predicted to lose their jobs in the June quarter despite the government’s new $1500-a-fortnight JobKeeper payment.
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The $1500 a fortnight wage subsidy for Australia workers is an unemployment rate “game changer,” but experts say the economy will still contract by about five per cent in 2020.
About 1.7 million people are expected to lose their jobs in the June quarter, but that will bounce back by about one million jobs in December as more workers remain connected to their employers through the JobKeeper wage subsidy, according to analysis by Westpac.
Compared to the peak forecast rate of 17 per cent unemployment in June without the JobKeeper payment, Westpac’s chief economic Bill Evans said he expected the rate will peak at 9 per cent in and then fall to about 7 per cent at the end of December.
“We also maintain our core view that while the intensity of the policies to address the virus will peak near the end of the June quarter, most policies will be maintained through the September quarter and the recovery will be delayed until the December quarter,” he said.
“Conditions in the global economy will remain very weak until well into the December quarter.”
Mr Evans said the extra shutdowns and tighter social distancing policies meant the economic impact of the crisis will be “much more severe” on most industries.
“As expected, the most seriously affected industries are likely to be: retail, accommodation, restaurants, transport, recreation and real estate,” he said.
“However we also expect negative impacts for other industries including manufacturing, construction and distribution.”
Mr Evans said other industries including health, government and telecommunications would see a “lift” in employment.
“We expect GDP will now contract by 8.5 per cent in the June quarter, to be followed by a 0.6 per cent contraction in the September quarter; and a 5.2 per cent lift in the December quarter,” he said.
“Overall, the economy is expected to contract by 5 per cent through the 2020 year.”
Mr Evans said those figures would be consistent with the unemployment rate settling to about 9 per cent by the end of the year.
“These unemployment estimates are consistent with a loss of jobs in the June quarter of around 1.7 million to be followed by a bounce back of around 1 million jobs in the December quarter,” he said.
“However the JobKeeper Payment has been a game changer for employment and the unemployment rate.”
Mr Evans said although “traditional demand” for a company’s services or products may have collapsed, reconnected workers may be able to generate activity for the businesses in other areas, such as expanding take away facilities for restaurants.
“Small businesses in particular, however, will still be challenged by other costs including rent, utilities and government charges,” he said.
ALMOST 200,000 BUSINESSES RUSH TO GRAB $130B WAGE SUBSIDY
Yesterday, Businesses were rushing to sign up to the federal government’s $130 billion plan to subsidise wages during the coronavirus pandemic.
As at midday Tuesday at least 192,558 unique ABN registrations for the scheme, representing potentially millions of workers across the country.
Premier Investments, which runs chains including Just Jeans, Smiggle and Portmans, has registered for JobKeeper on behalf of its 9000 staff.
Premier chairman Solomon Lew said the $1500-a-fortnight wage subsidy would give it and others a greater ability to retain team members during the COVID-19 crisis.
As of 8am today, over 113,000 Australian businesses have registered their interest in the new #JobKeeper wage subsidy of $1500 per fortnight for each employee. Our $130 billion plan is all about keeping Australians in jobs while we deal with this #coronavirus crisis.
— Scott Morrison (@ScottMorrisonMP) March 30, 2020
“Premier’s employees will now be able to access the JobKeeper subsidy in addition to the special arrangements we have put in place for them to access accrued annual and long service leave entitlements to reduce the financial impact over this time,” Mr Lew said.
“The ability to retain team members during this challenging time will give businesses the best possible opportunity to bounce back and thrive.”
A spokesman for Flight Centre, which has laid off 6000 staff, said it was also going to register.
“Our first impressions are that it is a very good program that should benefit those who have been stood down and also help companies preserve more roles for the future,” he said.
News Corp Australia has contacted Myer, David Jones, Kathmandu, Super Retail Group and Qantas for comment.
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About six million people who would have otherwise lost their job or been stood down are expected to benefit from the $130 billion scheme announced by the federal government on Monday.
Employees of businesses that have had a collapse in revenue due to the pandemic will be paid $1500 a fortnight over the next six months under the “unprecedented” plan.
The enormous cash injection brings the government’s total spend on economic measures to combat coronavirus to more than $320 billion — or 16.4 per cent of GDP — more than double that spent by the Rudd Government during the Global Financial Crisis.
Eligible employers must apply for the JobKeeper program through the ATO with proof of a decline in turnover of at least 30 per cent.
Sole traders with no employees (true solo) ARE eligible for the Jobkeeper wage subsidy of $1500 per fortnight if they've lost more than 30% of their business turnover to #COVIDー19. Eg. the florist in this government factsheet. #auspol pic.twitter.com/JgiQ3WW3C4
— James Elton (@JamesEltonPym) March 30, 2020
Businesses then inform their workers if they are eligible, and may start paying stood down workers $1500 a fortnight from now, which the government will reimburse and backdate to March 30.
Workers do not need to apply for the JobKeeper payment but should contact their employer to see if they’re eligible if they do not hear from the company.
Once approved the JobKeeper subsidy is paid to businesses through the ATO system on a monthly basis in arrears, which is then paid to workers through the normal wage system.
The government is able to monitor in real time if businesses pass on the $1500 through the ATO’s Single Touch Payroll system, which records how and when employers pay employees.
Any recently unemployed or stood down worker who has already applied for the Jobseeker payment must contact their employer to see if they are eligible for JobKeeper, and if so they should access the $1500 instead and end their Centrelink application.
Over $1.1 billion in Federal Government assistance for lower income Australians will hit bank accounts today. The first $750 payment will be paid automatically from today and progressively to those over 6.8 million people eligible for it, including pensioners, over coming weeks.
— Scott Morrison (@ScottMorrisonMP) March 31, 2020
The Australian share market climbed 7 per cent — the biggest session jump since October 1980 — in the hours following the announcement on Monday.
The subsidy is designed to keep workers tied to their employers so that when the coronavirus pandemic passes, and businesses start to reopen, staff still have a job to go back to.
Prime Minister Scott Morrison said the subsidy was the “economic lifeline” many Australians would need in the months ahead to get through the “twin crises” presented by the coronavirus pandemic.
“Some will say it is too little and others will say that it is too much,” the PM said.
“But I say we must work together to make this work, and to make it go as far as possible.”
Mr Morrison said the plan had been “calibrated” on the basis there was no way of knowing what other challenges may arise.
“Our goal is to protect the lives and livelihoods of Australians,” he said
“For the generations that will follow us out of this, many countries in the months ahead and perhaps beyond that may well see their economies collapse.
“We could see countries themselves fall into chaos (but) this will not be Australia.”
Treasurer Josh Frydenberg said the “unprecedented” flat payment was the equivalent of about 70 per cent of the median wage, and close to 100 per cent of the median wage in sectors hit hardest by coronavirus including retail, hospitality and tourism.
“Our wage subsidy scheme for Australia is unlike those announced by other nations,” he said.
“It’s more generous than the New Zealand scheme, it is broader than the United Kingdom scheme, as it applies to all employees not just those that have been stood down.
“And it’s available to all eligible firms, not just small businesses as is the case with the Canadian scheme.”
Employers or sole traders that have experienced a drop of at least 30 per cent in turnover due to coronavirus will qualify for the JobKeeper scheme, which would be paid to businesses monthly in arrears through the Australian Taxation Office.
Large businesses with a turnover of more than $1 billion must have experienced a 50 per cent drop to qualify.
Mr Morrison said although the JobKeeper subsidy kicked in at those thresholds, there remained an incentive for businesses to keep people working and top up their wage to reflect that.
Employers have been told to apply for the payment through the ATO and then contact their employees to notify them if they qualify for the subsidy.
All full and part-time workers, plus casuals who have been employed for at least 12 months, will qualify for the fortnightly payments.
Businesses who may have already sacked workers since March 1 are allowed to re-hire employees who would then also get the cash.
Any recently unemployed workers who have already applied for the Jobseeker allowance of up to $1100 a fortnight would be able to switch to the JobKeeper payment.
People are not able to get both payments.
The government will be able to ensure businesses are passing on the $1500 to employees, or instantly detect any wrongdoing through the ATO’s Single Touch Payroll system.
Commonwealth Bank chief Matt Comyn said the subsidy would make the coronavirus safety net “wider, deeper and stronger”.
“It will help many more businesses stay afloat, many more people keep their job and enable us all to rebound stronger and sooner when the crisis has passed,” Mr Comyn said.
COMMERCIAL LANDLORDS TO BE ELIGIBLE FOR REPAYMENT RELIEF
Commercial landlords with loans of up to $10 million will be eligible for six months worth of repayment relief but they cannot terminate a lease or evict any tenant who fails to pay rent.
Anna Bligh, CEO of the Australian Banking Association, said: “A week ago, banks announced they would provide six-month loan repayment deferrals for small businesses, up to loans of $3 million. Today, Australian banks will expand their business support package to all businesses with loans of up to $10 million.”
She said 98 per cent of all Australian businesses who have a loan with an Australian bank would also now be covered and eligible to have their repayments deferred for six months.
“This will take the weight off the shoulders of those businesses who employ almost 1.5 million Australians,” she said.
It comes at a time when economists are predicting a jump in the unemployment rate, possibly as high as 17 per cent.
The government has to date resisted the idea of a wage subsidy similar to the UK’s, which would fund 80 per cent of the wage bill of a business so it can keep its workers on the payroll rather than having them join a lengthening dole queue.
Mr Morrison said it was not a question of just “cutting and pasting” what other countries were doing and that the government had been working to find a scheme to fit with Australia’s system.
He asked businesses to hold off on any further decisions until they see the measures the government will be announcing in the next few days.
“We will be ensuring also that those who have already gone into this very devastating situation, where they have had to stand down workers, that any measures that we’re announcing will be taking them on as well,” he said.
Labor’s industrial relation’s spokesman Tony Burke said a wage subsidy needed to be implemented urgently.
“It has to be enough of a subsidy to give a real incentive to employers to keep people in their jobs,” he said in Sydney.
Finance Minister Mathias Cormann said having doubled the level of income support under the JobSeeker payment, the government was also going to ease restrictions in terms of partner income.
This would ensure that those with partners who are seeking support would not be negatively affected.
The current partner income test kicks in once a partner earns more than $48,000.
Several major companies including Qantas, Virgin Australia and Myer, and smaller companies – particularly in the hospitality and retail industries – have already stood down tens of thousands of workers.
Former ANZ chief economist Warren Hogan said the crisis had rapidly become an employment problem.
“I think a wage subsidy is critical at this juncture … because we have such a significant amount of jobs losses,” Mr Hogan told Sky News.
Treasury had estimated the impact of the coronavirus would see an additional one million people out of work, but already firms are shedding or have stood down between 60 to 90 per cent of their staff.
“I think very quickly we can talk about over a million jobs being lost. It looks like we are going to get through that in very short order,” Mr Hogan said.
“I think by the time we get to Easter we are going to probably see about 1.5 to 1.8 million job losses due to stand downs.
That would see the unemployment rate soar from 5.1 per cent as of February to somewhere above, between 15 and 17 per cent.”
R.M WILLIAMS JOINS LONG LIST OF AUSSIE STORES FORCED TO SHUT
R.M Williams has become the latest casualty of the coronavirus retail crisis, with the iconic shoe brand closing its stores on Saturday.
The boot brand, which are been operating in Australia since 1932, said it survived World War II, but the virus had stopped it “mid stride”.
R.M Williams did not say how many jobs would be lost from the closure.
Australian department store David Jones has also closed its small fashion stores – Country Road, Mimco, Witchery, Trenery and Politix, leaving 5000 staff without work.
David Jones’ major retail stores will continue to stay open at this stage, but its smaller DJs stores at Sydney’s Barangaroo and James Street in Brisbane have been closed.
Cotton On also closed after Myer announced it would close on Sunday due to the COVID-19 crisis.
In a statement on social media, Country Road said: “As a heritage Australian brand, we recognise that we have an important role to play in slowing the spread of COVID-19.
“Therefore, we have made the decision to temporarily close our Australian retail stores from end of day Saturday 28 March until further notice.
“This is a decision that has not been made lightly, and one we feel is necessary to protect the health and wellbeing of our team, customers and wider community.”
The statement said shoppers can still buy items online, and they are offering free delivery on orders over $50, with free returns within 60 days.
“We are working closely with all team members affected by the store closures and are exploring the best ways to offer our support in the coming weeks,” the statement read.
Trenery posted a similar note on their social media accounts, saying: “Today we unfortunately announce the temporary closure of our Australian Trenery stores from End of day today until further notice.
“This is a difficult decision we haven’t made lightly, but it’s the right thing to do to keep our customers and store teams safe.”
The brand will remain available online.
Politix also announced its temporary closure, telling shoppers: “The POLITIX website will still be up and running – you can browse velvet tuxedos to your heart’s content. And you’ll still be able to chat to us via email and live chat.
“As it stands, our warehouse team will keep handling online orders, and we’ve put special measures in place to keep them safe. We’ve also started doing contactless delivery, so there’s no need to sign for anything. Our partners will drop your POLITIX order right at your front door.”
Witchery stated it would trade until Sunday and then close its doors until further notice, as shoppers were encouraged to go online.
Cotton On released a statement on Saturday which revealed they were also closing.
“From 5pm Sunday 29 March, all our AUS stores will be temporarily closed,” the brand said.
“We want to say a huge thank you to our retail teams who have continued to amaze us with their hard work during this tough time. And to our customers, thank you for your support.”
The moves have come ahead of any future shut down on the retail trade by government.
The retail giant told its workers it had been in discussions with the supermarket giants to find them alternative employment.
“We’ve reached out to the retail community, and specifically to those retailers in the essential goods sector who are looking for support in their store and distribution networks,” it said.
“We have partnered with Aldi and Woolworths who we know will be lucky to have you because of your great skills and experience. There is an application process set-up for COG team members if you are interested and would like to apply for a role.”
Cotton On employer more than 20,000 workers globally.
Myer closed on Sunday and stood down 10,000 staff without pay as the coronavirus continues to wreak havoc on Australia’s economy, in a huge blow to Australia’s retail sector.
“The health and wellbeing of customers, team members, their families and the broader communities in which we operate remains Myer’s absolute priority,” the company said.
“As such, Myer will temporarily close all stores from the close of business on Sunday (local time) 29 March 2020, for an initial period of four weeks until 27 April 2020.
“Our thoughts are with our team members, and their families, as we know this will be a difficult period, and, in addition to offering free counselling and support, we will look at further ways to support their health and wellbeing during this time.”
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Myer will continue to trade online and has dropped the threshold for free delivery to $49 per order. The store said workers will be working in a more sanitary environment to process online orders and send them out to customers.
10,000 staff in stores across the country and support office will be temporarily stood down without pay starting from Monday.
However full and part time staff will have greater flexibility to access annual leave and long service entitlements.
A small group of business-critical roles will be maintained to undertake essential work during the period and to support our online businesses, the company said.
“These roles will operate on an equivalent of 80 per cent of their normal salaries and contracted hours,” the statement said.
The Myer Board, CEO and Managing Director John King, along with all of the Executive team members, have opted to not receive any remuneration during this period, but will continue to work in their respective roles.
Myer CEO, John King, said the decision to temporarily close all Myer stores and stand down staff is “one of the toughest decisions this company has faced in its 120 years of operation.”
“Our focus must remain on operating our business in a manner that protects the health and wellbeing of customers and team members, while supporting the government, and the communities in which we operate, in limiting the spread of COVID-19,” he said.
“We will focus on ensuring we offer the best possible online experience for our customers, while being ready to restart the business in four weeks.
“We thank our loyal customers and team members for their understanding during this unprecedented time,” Mr King said.
Originally published as Westpac: Job losses set to surge despite ‘game-chaging’ JobKeeper payment