It’s the biggest, most important question for employees and businesses looking down the year at what is being called The September Cliff, when many fear the collision of the end of government assistance packages and the loan holidays from the banks could bring about an economic collapse.
The Australian Financial Review has suggested that the economy will contract by 4 per cent this year, followed by another year of contraction of 1.3 per cent, and will finally return to growth of 3 per cent in the second half of 2021.
The Australian Bureau of Statistics has announced that the unofficial unemployment rate is 7.1%, its highest level since October 2001 of 7.1. It’s expected to rise to 8 per cent by the end of this year, and be at 7.28 per cent by next June.
And, of course, the 3.5 million Australians who are currently being paid under the JobKeeper scheme are anticipating losing, in some cases, the entirety of their pay come September, in one of the most hotly debated moves of the whole COVID crisis.
The program was announced in March under the early belief that the economy would “snap back” after six months, something which is clearly not going to happen. So where to from here?
Some groups, including the Australian Council of Trade Unions, tourism operators and other businesses are calling for JobKeeper to be extended past its September 27 end date by up to six months.
The Australian Industries Group, in a submission to the Fair Work Commission that called for a minimum wage freeze, argued that business conditions in May improved from their alarmingly low levels in April, but are still weak and at risk of falling again.
“This slight improvement is primarily and directly due to unprecedented levels of government financial support, in the form of JobKeeper, JobSeeker and other programs for businesses and individuals,” it wrote.
“It is not an indication that the economy is ‘recovering’ in any meaningful or sustainable sense. Looking ahead, it is important to be mindful that much of this crucial assistance is due to expire in September. The next few months until September – and then the months after the direct support is withdrawn – will be a difficult period of high risk, uncertainty and anxiety for businesses and households alike. It is essential that actions or decisions that will add to this risk are avoided.”
At the same times, some of those groups, as well as others, are warning that the package is unsustainable and the long-term cost to the government would sink the country into decades-long debt.
Besa Deda, chief economist at St George, told the AFR that it was a delicate balance.
“Like training wheels on a bicycle, JobKeeper is a temporary crutch while businesses navigate COVID-19,” she said. “Removing it too soon will end in tears. Keep it too long and there will be lasting consequences, both in terms of cost and efficiency.”
Back in May, Treasurer Josh Frydenberg warned that all stimulus measures would create a debt for future workers, something that is particularly concerning to younger workers who will be paying for this economic crisis for the next few decades.
“Australians know there is no money tree,” he said. “What we borrow today, we must repay in the future. Temporary and targeted, the new spending measures were not designed to go forever but to build a bridge to the recovery phase.”
Those who disagree with a hard end date to the JobKeeper program have a variety of proposals.
Non-partisan think tank Grattan Institute believes JobKeeper should be extended past September, albeit with some adjustments.
“JobKeeper should be expanded to include university staff, casual workers, and temporary migrants, and extended beyond September for businesses that are still in strife,” a Grattan Institute report published on Monday said.
It also suggested introducing a part-time payment to better target the scheme, and keeping the Coronavirus Supplement for JobSeeker until after JobKeeper is removed to cushion the blow.
Tax reform, infrastructure policy changes and other incentives are alternatives that have been proposed to help keep businesses running and Australians employed.