JobKeeper is set to be the greatest head-fake in the history of Australian fiscal policy. A policy purporting to keep workers employed is likely to achieve two other things. First, it led to a massive transfer of wealth from future generations (the young, and the not-yet born) to wealthy baby boomers. Second, it created a swathe of businesses that should have been wiped out by a COVID recession but instead live on, in zombified form.
At the time it was launched, JobKeeper was lauded by almost everyone. The left loved the prospect of free money purportedly being handed to young workers. The right loved it because it was a targeted boondoggle created by a Liberal government, which would likely be able to be manipulated by sophisticated businesses.
One (but not the only) flaw of JobKeeper was that it allowed companies to qualify for the cash handout based on a “forecast” of their turnover. In March 2020, as the nation was temporarily shut down, if a company believed (with reasonable justification) that its revenue would fall by 30% (or by 50% for larger businesses), it would be entitled to JobKeeper. Strangely, if it turned out revenue and profitability increased, the recipient could still keep the taxpayer-funded largesse.
JobKeeper was no relatively minor boondoggle, like regional grants — it cost $70 billion. Remember the much-criticised pink batts debacle? That cost $2 billion. Robodebt (before it imploded and led to a successful class action) wrongfully raised $2 billion from mostly unemployed people, some of whom ended their lives due to the mental anguish and stress.
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Less obvious beneficiaries
While the high-profile winners from JobKeeper were billionaires like Solly Lew and Gerry Harvey, who collected tens of millions of dollars in taxpayer-funded lucre (note: the tax hasn’t yet been paid), they were merely the public face of JobKeeper. The less obvious beneficiaries are the millions of already wealthy, older Australians who own real and financial assets. Similar to the US, rampant fiscal (and monetary) expansion has translated not to consumer price inflation, but to asset price inflation.
Property prices, spurred by a combination of stimulus and near-zero interest rates (as well as looser bank lending terms, because that will end well) have jumped to record highs. The sharemarket last week also hit its all-time high. This makes assets such as property even more out of reach for many aged under 35. Don’t forget, the $70 billion-plus cost of JobKeeper is almost certainly not being paid for by anyone aged over 60 given the fiscally prudent Liberal Party is running world-record budget deficits.
So, just to summarise: older folks, who already own most of the assets, see those assets increase in price due to government policy, which will be paid for by young people who don’t own many assets.
The second problem is that the stimulus (coupled with other boomer-friendly policies such as rental relief and eviction protections) created a large number of zombie companies that survived only due to government policy. Podcaster and brand expert Scott Galloway summed it up: “Creative destruction is good for young people and bad for the entrenched. The shedding of skin from existing players to new innovators — it’s a means of transferring wealth. Unless you let the winds of creative destruction blow, all you’re doing is cementing the wealth and status of the incumbents.”
These half-dead businesses being funded by future taxpayers are preventing new businesses from taking their place.
The federal government could have easily fixed the obvious problem of JobKeeper. Any business that made a profit, paid a dividend or enjoyed revenue increases should simply repay JobKeeper, up to that reported profit or dividend level (whichever is higher).
So those who praised the Morrison government’s COVID policies should probably look more closely at the fine print. JobKeeper was no Marxist handout to the poor. It was a reverse Robin Hood: a tax on future generations that benefits the rich.
Postscript: as I’m finalising this article, The Australian just reported that The Australia Club, arguably the most elite group of white males in the country (membership of which is understood to include George Pell, Tony Abbott and sexual harasser Dyson Heydon), received millions of dollars of JobKeeper money in 2020, before reporting a surplus of $1.8 million.
Should companies that made a profit during the pandemic be forced to pay back JobKeeper? Let us know your thoughts by writing to firstname.lastname@example.org. Please include your full name to be considered for publication in Crikey’s Your Say section.
Adam Schwab is a commentator, business director, and the co-founder of LuxuryEscapes.com. He is also the author of Pigs at the Trough: Lessons from Australia’s Decade of Corporate Greed.