JobKeeper worker subsidy payment to be extended at lower $1200 rate

JobKeeper will be ­extended for millions of stood-down workers beyond September at a new rate of $1200 a fortnight for six months.

Scott Morrison with a DisplayWise employee at a workshop in Miranda, southern Sydney, on Monday. Picture: Getty Images

JobKeeper payments will be ­extended for millions of stood-down workers beyond September at a new rate of $1200 a fortnight for an additional six months, as businesses face a slower recovery because of virus outbreaks in Victoria and NSW.

The $550 coronavirus supplement — which has boosted JobSeeker to about $1115 a fortnight — will be extended beyond the September cut-off date and paid at a lower rate, but still leave the jobless ahead of the previous $556 a fortnight they received through the Newstart payment.

Tighter eligibility tests will be applied to JobKeeper, which subsidies the wages of about 3.5 million workers whose employers have suffered a major revenue hit from the coronavirus pandemic.

These will include a steeper reduction in payments for almost 900,000 part-time and casual workers who had received an average effective pay rise under the $70bn JobKeeper scheme.

The new rate — a reduction on the current $1500 a fortnight — will be announced on Tuesday, two days before the government’s economic statement, which will unveil a record deficit as it details the unfolding economic impact of the COVID-19 pandemic.

Under the rules to apply from October, businesses will face stricter eligibility guidelines on ­accessing the payments through a more targeted system that regularly assesses an enterprise’s loss of turnover.

The shake-up represents a massive expansion of the government’s $260bn economic rescue package and Scott Morrison hinted on Monday there could be further rounds of support delivered in a “series of phases”.

“How many phases there are, it is very difficult to say because there are so many uncertainties associated with COVID-19,” the Prime Minister said. “Australia is faring better than almost any, if not every, other developed economy in the world today.”

Mr Morrison warned there were businesses still experiencing a 90 per cent reduction in turnover, saying those operating in the business events, exhibition, aviation, entertainment, hospitality and tourism industries were some of the hardest hit. He said the new round of support would be targeted and temporary and just as “effective as the first round”.

“There will be several months for businesses to adjust to the next phase,” he said. “The supports that have been in place since April will be in place until September, and then we’ll move into a new phase.”

Josh Frydenberg said JobKeeper had served as an “economic lifeline to millions of Australians” and promised it would be extended for those businesses that needed it most.

“The Morrison government has provided an unprecedented level of economic support to date worth $260bn or 13.3 per cent of GDP,” the Treasurer said. “A crucial part of this economic support was the $70 billion JobKeeper payment to keep businesses in business and Australians in jobs.”

A three-month review of the JobKeeper scheme, to be released on Tuesday, found almost $30bn had been paid out to 3.5 million workers and thrown a line of support to just under one million businesses. The Treasury review found JobKeeper had been successful in supporting business and job survival, preserving the employment relationship and providing income support. But it also identified problems with the scheme.

“It distorts wage relativities ­between lower and higher paid jobs, it dampens incentives to work, it hampers labour mobility and the reallocation of workers to more productive roles, and it keeps businesses afloat that would not be viable without ongoing support,” the review found.

“A better approach to sectoral targeting would be to maintain JobKeeper but reassess eligibility in October based on actual decline in turnover. This would target the most affected businesses and would reduce the proportion of the economy at risk of the adverse incentives of JobKeeper.”

“It may also be appropriate at this juncture to consider reducing payments to wean off businesses from ongoing support.”

Of the JobKeeper employee recipients, Treasury found two groups whose incentives to work or to take on more hours were blunted: part-timers and casuals, who received an increase in income due to the flat rate payment, as well as employees who had been stood down.

The government’s revised JobKeeper payment will be extended temporarily to March 28 — an extra six months — and a two-tier system will be applied.

In the top tier, payments will be cut back to $1200 a fortnight while the second threshold will apply to the roughly 900,000 people who earned more under the program than they did in February before government assistance kicked-in.

The Treasury review found the value of the income increase was $130 when averaged across all JobKeeper recipients.

When averaged across only those who had received an ­income boost, the increase leapt to $550.

As of July 15, payments under the scheme totalled $29.8bn with Treasury finding the payment went to businesses that experienced an average decline in turnover in April of 37 per cent against the same month in 2019.

Finance Minister Mathias Cormann said JobKeeper had been “well targeted” but created a number of “adverse incentives”.