Treasurer Josh Frydenberg and Prime Minister Scott Morrison (Image: AAP/Lukas Coch)

After an inexplicable wait that has allowed worries about a “fiscal cliff” to undermine business and consumer confidence, the government has belatedly unveiled its plans for JobKeeper and JobSeeker as the Victorian outbreak continues and the employment market struggles to regain even a fraction of the massive losses of March and April.

The government will, as expected, continue JobKeeper until March — subject to an updated revenue test and tapered payments — in a move that is crucial to keeping what is passing for the economic recovery going.

Fewer businesses will qualify for assistance given that those outside Victoria are emerging from lockdown, but it will still be invaluable in keeping hundreds of thousands of people in jobs and keeping businesses that will be viable in a post-lockdown world going.

And the revenue-based assessment mechanism is far better than sector-specific or region-specific handouts.

The main flaw is that it should have been announced earlier to ward off uncertainty, but in the end the government got there.

The amended scheme will reduce assistance for workers who had a windfall from JobKeeper — the government says one-quarter of recipients gets an average of $550 above their pre-COVID income.

The tapered payments will involve a tiered system of $1200 a fortnight for full-time workers and $750 for part-time workers from October to December, then $1000 for full-time workers and $650 for part-time workers in the March 2021 quarter.

Prime Minister Scott Morrison went to great lengths to justify the windfall this morning as the product of a necessary single payment system while the government developed the capacity to provide a tiered payment system that will commence from October.

Treasurer Josh Frydenberg also argued that many workers who received a windfall lost other jobs.

It’s worth making the point that if a Labor government was responsible for a design flaw that handed such a windfall to 25% of all program recipients, the Coalition would have spent the past four months screaming blue murder and its media allies would have conducted an extensive campaign of demonisation of the recipients.

But it’s a world turned upside down with Morrison in charge.

The tapering of JobKeeper will send many firms to the wall. Some are the much-vaunted “zombie companies” that strike such fear into the hearts of economists (although your zombie company is bad, my Business Council member that devotes large amounts of money to gaming the political system to secure regulatory and financial assistance crucial to its existence is fine).

Others are firms that could be viable once normal economic conditions return but will fall victim to the wait and uncertainty.

All the government can do is taper the process so that hundreds of thousands of firms don’t shut all at once. There are no good policy options on this, only more or less bad ones, and the government is going for the least worst.

On JobSeeker, however, the government has been guided by neo-liberal ideology that a class of undeserving poor — dole bludgers in traditional parlance — need to be forced into work by cutting payments.

Worried that part-timers on the reduced JobKeeper rate will abandon their “zombie” jobs and switch to JobSeeker, the coronavirus JobSeeker supplement — $550 a fortnight for singles on top of the base JobSeeker payment of $565 a fortnight — will be cut back to $250, down $300 a fortnight, until the end of December.

That will send a large number of people back into poverty, although the number will be significantly smaller than 500,000, based on the Australia Institute’s recent work that showed a drop in the supplement to $150 a fortnight would push about half a million people back into poverty.

The rationale is based on anecdotes from employers about the difficulty of securing workers — when on most recent figures, there were 130,000 vacancies in the country for more than 900,000 job seekers, and growing. Rarely has the cliché that the best form of welfare is a job rung hollower.

The $300 a fortnight fall in JobSeeker, driven by some business anecdotes and a punitive mindset, will force many families into poverty at a time when there’s barely work for one in seven job seekers.

It will also cut household demand by billions of dollars, making life even more difficult for small businesses that rely on consumer spending.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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