JobKeeper stabilised economy in time of crisis, review finds

JobKeeper delivered value for its $88bn price tag during Covid by stabilising the economy and workforce, an independent evaluation finds in a report welcomed by Josh Frydenberg.

JobKeeper was a valuable program to counter the effects of Covid-19 on the economy, a new report finds.

The $88bn poured into JobKeeper during the worst of the Covid pandemic delivered value for money by preserving employment, supporting incomes especially among poorer Australians and preventing large-scale business failures, a new analysis finds.

The emergency welfare policy stabilised the Australian economy at a time of enormous economic uncertainty, saving between 300,000 and 800,000 jobs, an independent report into the scheme commissioned by federal Treasury concludes.

JobKeeper was also well-managed, the report finds, and “implemented with incredible speed” as it balanced the rapid rollout of payments against the risk of error and fraud.

But there were concerns about the inefficiency of the flat-rate $1500 payment in the scheme’s first phase, with more than one in 10 recipients receiving more in JobKeeper than they were earning before the pandemic.

And the report notes almost $9bn was provided to businesses that had increased turnover at the time they were receiving JobKeeper payments, though it says a “clawback” mechanism would likely have undermined confidence in the economy and introduced adverse distortions.

On Saturday, the Coalition treasurer who oversaw JobKeeper, Josh Frydenberg, welcomed the review’s findings in a post on X.

Following the release yesterday afternoon of the Albanese Government's Independent Evaluation of the JobKeeper Payment, my statement below👇 pic.twitter.com/Jr4yMasGRD

— Josh Frydenberg (@JoshFrydenberg) October 28, 2023

Mr Frydenberg said that with the nation then facing its biggest economic shock since the Great Depession, JobKeeper was “a highly successful program saving lives and livelihoods’’.

He said it was also “instrumental in putting Australia on a path to its lowest unemployment rate in almost 50 years”.

The JobKeeper scheme was introduced in March 30, 2020, just over two months after the first case of Covid-19 was reported in Australia. The first phase, lasting six months, offered eligible businesses $1500-a-fortnight payments for each employee, to be passed on to the employee. The business must have suffered a significant drop in turnover. It was renewed with revised parameters through to March 28, 2021.

While the original cost of JobKeeper was estimated to be $130bn for the first six months, the entire scheme cost $88.8bn.

The report, conducted by former senior Treasury official and ex-International Monetary Fund executive director Nigel Ray, gives the JobKeeper policy strong support.

“JobKeeper helped to stabilise the Australian economy during a crisis. It preserved employment, supported incomes and prevented large-scale business failures during the pandemic,” it says.

“Overall, JobKeeper provided value for money through its broad social benefits and the role it played in addressing extraordinary and unquantifiable uncertainty and averting the worst economic tail risks of the pandemic.”

The scheme’s rollout also ­receives a tick. “(It) was implemented with incredible speed and was well managed. In the circumstances, implementation struck an appropriate balance between rapidly deploying support and managing risks of error and fraud,” the report finds.

The scheme could have been introduced earlier, and some elements, including the flat-rate payment in the initial stages and some of the eligibility criteria could have been better ­designed.

“Exclusions based on employee characteristics such as being a short-term casual or temporary migrant compromised the efficacy of JobKeeper and led to worse outcomes,” the report says.

Treasurer Jim Chalmers’ spokesperson said the review showed JobKeeper was “a good program that was badly implemented by the Morrison government”.

“The report makes clear the Coalition’s many errors in managing JobKeeper, including the harm caused to individuals by the program’s delays, the narrow ­eligibility requirements that reduced its effectiveness, and the billions of dollars in payments that went to companies that didn’t end up needing them,” they said.

Opposition Treasury spokesman Angus Taylor said the report justified the previous government’s economic response to Covid. “While JobKeeper was a costly fiscal intervention, this ­report is confirmation that the Coalition’s strong economic management laid the foundation for Australia’s economic recovery from Covid-19,” he said.