Via the excellent Geroge Tharenou at UBS:
JobKeeper extended by 6 months to Mar-21, but tapered, worth extra ~$16bn
The Australian Government announced a six month extension of the JobKeeper wage subsidy, which was due to expire at the end of Sep-2020, to March-2021. This is a longer extension than flagged by previous Government comments, and hence a bigger fiscal stimulus than UBS expected (and probably more than most had predicted). However, the Government still significantly tapered the program. The payment rate will change from a flat $1,500 per fortnight for all on JobKeeper until the end of Q3-2020 – which currently covers 3.5mn people (or a ~30% share of pre-COVID employment) – to a new 2-tier system, which will be phased out over coming quarters. For Q4-2020, the new higher rate is now $1200/fortnight for those working 20 hours or more per week; as well as a lower rate of $750 for those working less than 20 hours. Then in Q1-2021, the rates will be reduced again to $1000, and $650, respectively. The changes are especially designed to limit the estimated one-quarter of those on JobKeeper who have been receiving an average $550 more than their prior wage (compared with their wage from the single employer paying the JobKeeper – albeit the actual incidence is less given many of these workers are casual and/or part-time and work multiple jobs). Meanwhile, the business eligibility test was also tightened from a ‘once-in-all-in’ approach – which previously meant all businesses automatically qualified for the full initial period of 6 months based on projected turnover – to a new quarterly assessment based on actual turnover remaining down continuously each quarter (compared with the pre-COVID level). However, the threshold amounts are unchanged at -30% for small businesses with annual turnover of $1bn or less; and -50% for large businesses with turnover >$1bn (and -15% for NFP’s). This 2nd phase of JobKeeper is expected to cover 1.4mn employees in Q4, and 1.0mn in Q1 (vs ~3.5mn now). The extra cost is $16bn, of which we estimate ~$10bn is in Q4 and ~$6bn in Q1 – with the total cost of JobKeeper now $86bn (was $70bn).JobSeeker extended 3-months to Q4, but a reduced rate, albeit costing ~$3.8bn
Elsewhere, the JobSeeker COVID supplement payment was also reduced to $250/fortnight for Q4 (compared with $550 from Q2 until the end of Q3), reducing the total JobSeeker amount from ~$1100, to ~$815. (It will then be reviewed again later this year, for a likely further temporary and/or permanent increase.) However, the income free threshold for those on JobSeeker was increased to $300, albeit the ‘mutual obligation job search test’ and asset/means tests were reintroduced. The extension of the JobSeeker top-up will cost $3.8bn extra, raising the total cost to $18bn.
