Coronavirus: Scott Morrison’s $1bn-a-week economic rescue

The NSW rescue package increases cashflow support for 460,000 businesses and provides $750-a-week for individuals.

Scott Morrison rejected a return to the $90bn JobKeeper wage subsidy scheme. Picture: Gary Ramage

Scott Morrison and Gladys Berejiklian will spend more than $1bn a week to protect jobs and keep employers afloat, boosting payments to NSW businesses, full-time workers, casuals, sole traders and dole recipients amid fears an extended lockdown could drive thousands onto welfare.

The NSW rescue package, announced after the Greater Sydney lockdown was extended by at least four weeks, increases cashflow support for 460,000 businesses and provides $750-a-week Covid-19 disaster payments for individuals.

The Prime Minister on Wednesday rejected a return to the $90bn JobKeeper wage subsidy scheme and revealed the new payments system would be the model for future responses to lockdowns sparked by the more contagious Delta strain.

“The way we are structuring these supports to people, whether it’s the individual payments or the business support payments, are to ensure that those businesses and those individuals can get through as whole as possible through these lockdowns, so on the other side, our economy can roll back,” Mr Morrison said.

“That is what it’s designed to do. And our measures of support are never set and forget. All states and territories, together with the commonwealth, are working closely as we’re adjusting how we’re dealing with this Delta strain.”

In addition to the NSW payments, bankrolled by a federal-state funding split of about $750m and $325m a week, the Morrison government announced a joint $400m package with Victoria to support businesses impacted by lockdowns in that state.

The Covid-19 packages were endorsed by the expenditure review committee of cabinet this week following discussions between Mr Morrison, the NSW Premier, federal Treasurer Josh Frydenberg and his NSW counterpart, Dominic Perrottet.

Despite pleas from Mr Perrottet to revive JobKeeper, which provided full- and part-time workers with payments of up to $1500 a fortnight, Mr Morrison said he had opted for a faster, temporary system that captured more people.

“It’s not the right solution for the problems we have now,” Mr Morrison said.

“What we’re doing now is faster. It’s more effective, it’s more targeted. It’s getting help where it’s needed far more quickly.

“What we need now is the focused effort on where the need is right now. And so it can be turned on and off to the extent that we have outbreaks that occur.”

The federal government agreed to increase economic support across the board, including for welfare recipients, in response to concerns that, if the nation’s biggest state failed to contain the Covid-19 spread within a month, the labour market force recovery could be derailed.

New Department of Social Services data obtained by The Australian revealed that, on the back of the unemployment rate plunging to 4.9 per cent in June, the number of JobSeeker recipients fell below 1 million on July 9. The milestone marked the first time it had fallen that low since April 10 last year.

After JobSeeker numbers peaked at almost 1.5 million last May, all states recorded significant drops in reliance on the welfare payment over the past year.

In the four weeks to Friday last week, the number of NSW JobSeeker recipients increased by 4092. Amid lockdowns in NSW, Victoria and South Australia, 53,408 new JobSeeker claims were received.

Ms Berejiklian said she did not want to see “people joining the unemployment queue”. The boosted payments were intended to keep workers attached with employers during the lockdown. “People should not feel stressed about their financial position,” Ms Berejiklian said.

“We want people to rely on these payments so that they can keep going without stress, knowing that there will be money for what they need in the next four weeks. Whether you’re a business, whether you’re an individual, whether you’re someone who gets a part-payment already, please know that you will be supported during this time.”

Mr Morrison said he hoped that when businesses returned, workers could resume their jobs.

“One of the problems we had with JobKeeper after some time is that Australia opened up again and we had people who were getting income support payments who then were taken out of the labour market,” he said.

Under the NSW support package, an additional 1900 NSW firms employing 300,000 people will be eligible for expanded financial support of up to $100,000 a week to cushion the blow of Sydney’s additional month of lockdown. The Covid weekly disaster payment for affected workers will jump to as much as $750.

Victorian businesses will also receive extra financial support with the $400m joint package helping firms recover from the recent round of lockdowns and assist those that continue to suffer from lingering health measures.

The NSW scheme will continue to be calculated at 40 per cent of a company’s payroll, between $1500 and $10,000 a week. The annual turnover threshold was boosted from $50m to $250m. Recipients will still need to show a 30 per cent decline in revenue as a result of health restrictions.

For non-employing businesses, such as sole traders, the payment will remain set at $1000 a week. The expanded payment will take effect from July 18.

The commonwealth’s disaster support payment for employees will increase from $600 a week to $750 for those who have lost 20 or more hours — equivalent to the highest payment under JobKeeper. Workers in the state who have lost between from eight to fewer than 20 hours will from next week be eligible for $450 a week, up from $375 previously.

The federal government has also extended support to NSW residents receiving welfare, who will now receive $200 in weekly payments in addition to their government benefits if they can show their weekly working hours have been reduced by more than eight hours as a result of lockdowns.

Businesses will still be required to maintain their employee headcount as at July 13 — covering permanent and long-term casual employees — by “not taking active steps to terminate their employment”. The expanded payment will now cover about 460,000 NSW businesses employing 3.3 million workers in NSW.

CBA head of Australian economics Gareth Aird warned that the extended lockdown would cost 300,000 jobs in the state and drive the unemployment rate as high as 5.6 per cent by October. An anticipated bounce out of lockdown over the final two months of the year would help the jobless rate recover to 5.2 per cent.

Mr Aird said “a deep contraction in GDP” in the September quarter was “now a fait accompli”, forecasting the national economy to shrink by 2.7 per cent, or by roughly $13.5bn.

However, he predicted the country would escape its second recession in as many years as activity resumed in November and December.