Coronavirus: Treasury faces $60bn question

Cartoon: Johannes Leak

One of the biggest budget accounting errors in memory, by the Treasury and the Australian Taxation Office, is deeply embarrassing for the Morrison government, especially Josh Frydenberg. Anthony Albanese and his frontbench are relishing their opponents’ discomfort, with digs claiming the government “couldn’t even run a bath’’ and that the error was so enormous it “could be seen from space”.

Beyond the banter, the opposition and a range of interest groups are asking how the $60bn will be spent. There is no shortage of claimants clamouring for the JobKeeper scheme to be extended in favour of the higher education and arts sectors, casual workers and employees of foreign companies. The government is right to resist such pressure, and should continue to do so.

The $60bn is not money sitting in the bank, as Scott Morrison said yesterday. It is money that the government would otherwise have had to borrow, against the taxes that will be paid by this and future generations. The fact that the $1500-a-fortnight JobKeeper scheme is supporting 3.5 million workers rather than the anticipated 6.5 million people is a positive sign. More employers and staff have managed to continue business as usual, albeit with more working from home, during the lockdown.

There is no reason, at this stage, to extend the scope or duration of the generous JobKeeper scheme, which is scheduled to end on September 24.

On principle, decisions to spend billions of extra dollars should not be made because it is possible to spend money. Outlays should be made because they are required in the public interest. Extra caution is needed in spending borrowed money, especially during a major economic shock such as the COVID-19 pandemic. Hours before news emerged on Friday that the budget outlook had ­improved by $60bn, one of the world’s top three credit ratings agencies, Fitch, warned that it might cut Australia’s coveted AAA rating. It cited concerns about Australia’s soaring debt and deficits incurred through the massive stimulus programs enacted to offset the fallout from the coronavirus. It is “welcome news that the impact on the public purse from the (JobKeeper) program will not be as great as initially ­estimated” as the Treasurer says. The program, established as a temporary lifeline for businesses and their staff, is due to be reviewed at the end of June. Anomalies such as lower-paid workers receiving far more money per fortnight under the scheme than they normally do in wages need to be addressed.

The Treasury bureaucracy needs to examine how such a major mistake happened. The error suggests lessons need to be learned about why the modelling showing JobKeeper would likely be deployed to support about 6.5 million workers was so far wide of the mark. Much of the problem appears to stem from the ATO forms filled out by employers. About 1000 businesses made errors when reporting their estimates of eligible employees on their enrolment forms. Instead of reporting the ­number of employees they expected to be eligible, they reported the amount of assistance they ­expected to receive. In some cases, as Mr Frydenberg writes on Monday, they wrote 3000 instead of two. The subsidy will cost $70bn rather than $130bn. While embarrassing, at least the error is on the right side of the ledger.