JobKeeper verdict in July as Australia prepares for first recession in 29 years
Treasurer Josh Frydenberg has called time on Australia’s 29-year growth run, revealing JobKeeper changes will be finalised in July.
A Treasury review of the $70 billion JobKeeper program will be handed down in July as the Morrison government considers whether to curtail the quantum of the $1,500 fortnightly wage subsidies.
Treasurer Josh Frydenberg says he will wait for national cabinet’s three-stage reopening plan to finalise in July before delivering a verdict on JobKeeper.
“That should allow us to get a better sense of where the economy is at that point in time,” Frydenberg said.
The latest timeline comes hours after official figures revealed gross domestic product (GDP) fell 0.3% in the March quarter, setting Australia up for its first recession in 29 years.
While the economy is yet to record its second consecutive quarter of GDP contraction — the widely agreed definition of a recession — Frydenberg nevertheless called time on Australia’s world-leading growth streak, saying modelling showed we are already there.
In other words, the Treasurer says the worst is yet to come.
“Based on what we know from Treasury, we’re going to see a contraction in the June quarter which is going to be a lot more substantial than what we have seen in the March quarter,” Frydenberg said.
Treasury is already forecasting the unemployment rate to move past 10% in the June quarter, which captures the bulk of the coronavirus lockdown period in April and May.
A recession has been widely expected in the wake of the COVID-19 pandemic, forcing large swathes of the economy to curtail their operations or shut down entirely from March.
But the March quarter figures also reflect the economic pain felt during the bushfire crisis in January, particularly for the tourism, accommodation and food services industries.
Consumer spending and private sector demand fell 1.1% over the March quarter, while business investment was down 0.8% — these factors drove the GDP contraction, offsetting a 1.4% rise in public sector spending.
It was the first time GDP fell in the March quarter since 2011, and the 1.4% year-on-year increase was the slowest since September 2009 amid the global financial crisis.
How the Australian economy recovers from the pandemic will inform how the Morrison government varies its wage subsidy scheme, which is the largest single fiscal support program currently on offer.
Treasury had initially forecast more than 6.5 million workers would be covered by the scheme at a cost of $130 billion, but has since revised this estimate to $70 billion and about 3.5 million workers.
“We want to understand where whether the quantum — that $1,500 payment — continues to be the right amount,” Frydenberg said of the JobKeeper review.
“Also bearing in mind that some people are getting paid more than they would otherwise get by virtue of having a flat payment.
“But, in the context of an economy where the restrictions are being eased and people are getting back into work, we need to assess … the continuation of that JobKeeper program in that context, and it’s too early to pre-empt what the outcomes of that review will be,” he continued.
