SYDNEY (BLOOMBERG) – Australia’s government will extend its flagship wage subsidy programme beyond the end of September as it seeks to shore up the economy and stop the jobless rate spiralling even higher.
Prime Minister Scott Morrison said however that the flat A$1,500 (S$1,464) JobKeeper payment would be reduced. He also roughly halved an unemployment benefit supplement.
The JobKeeper programme, unveiled under a massive stimulus package in the early days of the coronavirus crisis, has “saved businesses and it has saved livelihoods,” Morrison said in Canberra on Tuesday (July 21). The amended plan marked the “next step in our journey” to dealing with the economic fallout, he said.
The government is providing a framework of ongoing stimulus ahead of its economic and fiscal update on Thursday. The extension will allay fears of a fiscal cliff emerging whereby struggling firms and households are suddenly left without cash.
As the coronavirus continues to pummel the economy, Australia’s jobless rate climbed to 7.4 per cent in June.
JobKeeper has seen the government pay wage subsidies of A$1,500 every two weeks per employee to help struggling firms keep people in work.
It will have two tiers from the end of September to better reflect the hours people work. The payment will initially fall to A$1,200 for full-time workers, and A$750 for those working less than 20 hours per week. And from January to the end of March, it will be cut again to A$1,000 and A$650.
The supplement to the JobSeeker unemployment benefit will also be cut to A$250 from A$550 and will run until the end of the year.
The cost of extending the two programmes will total about A$19.8 billion, Treasurer Josh Frydenberg said.
In its review of the JobKeeper programme, Treasury said it had been effective and recommended it be extended.
But it also said the programme had altered wages relative to the amount of hours worked, potentially blunting a person’s incentives to work, or to take on more hours.
It also said that the introduction of extra income support under JobSeeker may be affecting incentives to work.