Companies join queue for JobKeeper payments

Companies worth a combined $58bn are lining up for the federal government’s $130bn JobKeeper wage subsidy.

Cochlear CEO Dig Howitt Picture: James Croucher

Companies worth a combined $58bn are lining up for the federal government’s $130bn JobKeeper wage subsidy, forming the biggest corporate welfare gold rush in Australia’s history.

Some of the largest companies on the ASX, including hearing implant maker Cochlear, Qantas, gaming giant Tabcorp and casino groups Crown Resorts and Star Entertainment, have applied for the scheme after suffering coronavirus-fuelled revenue wipeouts.

The corporate heavyweights join 835,000 businesses across Australia that have enrolled in the scheme, which pays their 5.5 million employees $1500 a fortnight.

Josh Frydenberg said the JobKeeper subsidy formed the biggest fiscal response in Australia’s history and, combined with other measures, represented about 16.4 per cent of the nation’s gross domestic product and had sent government debt soaring to $618bn.

But the scale of the spending has helped limit the unemployment rate, as the Reserve Bank noted in its latest statement on monetary policy on Friday.

“Although there is expected to be a large increase in the unemployment rate — perhaps peaking at around 10 per cent — the increase would have been much larger were it not for the JobKeeper wage subsidy program,” the RBA said.

“The JobKeeper program will support employee earnings by reducing job losses. The program also provides a wage floor for eligible employees that will increase income in the near term for lower-paid employees and limit the decline in income for those who have had their hours reduced or been stood down,” the RBA added

While the Treasurer said the scheme had “saved the bacon” of some businesses, he reiterated it was temporary, with payments due to end on September 27.

This is despite Mr Frydenberg facing pressure from the opposition to extend the scheme and pressure within his own party to phase it out, with Liberal MP Jason Falinski calling for the handouts to end as early as next month, when schools return full-time.

“Australians know there is no money tree,” Mr Frydenberg said in his ministerial statement on the economy on Tuesday.

“What we borrow today, we must repay in the future. Temporary and targeted, the new spending measures were not designed to go forever but to build a bridge to the recovery phase.”

And Mr Frydenberg said businesses must play their part in building that bridge, particularly as Treasury forecasts unemployment to rise to 10 per cent, or result in 1.4 million people out of work, in the June quarter.

“Unleashing the power of dynamic, innovative and open markets must be central to the recovery, with the private sector leading job creation, not government,” he said.

In that sense, JobKeeper is a primer, which appears to be working. According to the Bureau of Statistics’ most recent survey of businesses, about 45 per cent of firms reported that the scheme had influenced their decision to continue to employ staff.

Meanwhile, 60 per cent of surveyed firms that registered for the program were also intending to maintain their workforce.

JobKeeper has tight eligibility criteria. Businesses turning over more than $1bn a year must show a monthly revenue fall of at least 50 per cent to access the scheme.

Cochlear — a $12.6bn company that generated about 16 per cent of its revenue last year in Australia and elsewhere in the Asia-Pacific, including China and Japan — confirmed on Monday it would seek JobKeeper funds as it fights to retain as much of its workforce as it could after revenue fell 60 per cent last month.

Chief executive Dig Howitt said the global bans on elective surgeries had hit the company hard, with sales of cochlear and acoustic implants falling 80 per cent last month. While some surgeries were starting to resume it was too early to signal a recovery.

“We continue to expect that many of the delayed surgeries will progress once hospitals resume normal operations, although the pace of the recovery is unclear,” Mr Howitt said, adding that he expected any financial support from the commonwealth and other governments around the world to be relatively small.

“I’ve seen some European companies indicating that the governments are covering up to 20 per cent of their cost base. Well it’s absolutely nothing like that for us. It’s welcomed but it will be a very small number.”

Qantas was one of the first companies to flag its intention to apply for JobKeeper, after government-imposed travel bans led to domestic and international air travel plunging more than 97 per cent. “Since the last cash balance update in March, the group has seen outflows including a $250m bond repayment, elevated levels of annual leave payments from standing down more than 25,000 employees ahead of the JobKeeper program starting, and payment of bills from its pre-crisis levels of flying activity,” Qantas said in a statement to the ASX last week.

“As a result of the crisis’s impact on travel, the stand-down of employees will now be extended until at least the end of June. The impact of this stand-down is deeply regrettable but has been greatly softened by the JobKeeper program, which the group commenced paying several weeks ahead of the official payment start date.”

The grounding of air fleets triggered rival Virgin Australia to enter administration and also applying for the JobKeeper subsidy.

Other companies lining up for JobKeeper included poker-machine maker Aristocrat, which has a market capitalisation of $12.6bn, listed car dealership group AP ­Eagers, Solomon Lew’s Premier Investments, Myer, footwear company Accent and theme park operators Ardent Leisure and Village Roadshow.