On JobKeeper

I have an op-ed that appeared in the AFR online today and will be in print tomorrow on the JobKeeper program.

The bottom line is that we as a nation simply cannot afford to pay people to sit at home and not produce. Now some economists will tell us that JobKeeper is a transfer and not a cost and so we have nothing to worry about. Others might tell us that public debt doesn’t really matter because we’re really just borrowing from ourselves. Whatever. The economy is not a perpetual motion machine running on fairy dust or unicorn farts.

The economic challenge that we now face is getting Australians back to work. Sit-down money had a place in securing our health – but won’t help in the next phase of recovery.

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52 Responses to On JobKeeper

  1. Roger W

    “Now some economists will tell us that JobKeeper is a transfer and not a cost and so we have nothing to worry about. Others might tell us that public debt doesn’t really matter because we’re really just borrowing from ourselves.”
    The fact that any adult could believe this, let alone identify themselves as economists, is the most disturbing issue. Rather like a medical doctor still thinking it appropriate to study your astrological chart to determine your health.

  2. Professor Fred Lenin

    Sinclair cany you please answer the following questions most laymen dont understand.
    From whom or what does the government “borrow ” these monstrous amounts ?
    To whom is the interest on the borrowing paid?
    Has a government ever in history paid back these huge sums ?
    Has Australia ever beeb debt free ?
    Has Any government in Australia ever actuall been in the black financially?
    I await your answers ,I can then explain it to my grandchildren who will probably still be paying for these borrowings ,and trying to explain to their grandchildren why.

  3. mundi

    Education level in Australia for economic matters is incredibly low.

    A common thing you see on all the leftist areas of the web is that JobSeeker and JobKeeper boost the economy because “the people getting it spend all the money at businesses”.

    We literally have large people portion of the population that has heard nothing other than goernment spending boost the economy, that they believe it. They believe that consumption grows an economy.

    Their explination always involve: Money and consumption.

    Production isn’t even mentioned. In true keynesian fasion – production isn’t even needed.

  4. Infidel Tiger King

    I spoke to a friend of mine yesterday and he commented that for the first time in 15 years his wife is now earning an income: $750 per week.

    Ethically he didn’t think it was right, but then he remembered all the tax he has paid.

    Such a stupid scheme.

  5. Tim Neilson

    Has a government ever in history paid back these huge sums ?
    Has Australia ever beeb debt free ?
    Has Any government in Australia ever actuall been in the black financially?

    Prof., the much maligned Howard government paid off the debt and was in the black. Technically they weren’t “debt free” -they kept some Commonwealth bonds on issue to keep liquidity in the bond markets, but their net position was positive, as a result of something like 9 surpluses in a row. Plus they set up the Future Fund and funded it to mitigate all the hitherto unfunded public service pension liabilities that were a ticking fiscal time bomb, and put future politicians and public servants onto normal “accumulation” super arrangements to prevent that time bomb from being re-armed.
    Of course at the time the State and Territory governments were still in debt and there was private sector debt but Howard and Costello did a stellar job.
    Then we got KRudd and Goose Swansteen and we’ve never looked back.

  6. Sean

    We are in the midst of a ‘Zombie Economy’

    restricted by government rules whole sectors are forced to operate unprofitably. Someone has to make the case that lockdowns that restrict cafes/pubs etc. are costing the taxpayer a fortune based on what scientific reasoning? Why not 30 people in a venue, why not a square meter rule or just open up and let people make their own decisions whilst following common sense in physical distancing. We have flattened the curve, now we are sleepwalking into a depression

  7. Robber Baron

    Sinc, why do you write for that Marxist rag?

  8. Ed Case

    I can’t see how it can work.
    If an employee does $750 or less work in a week, they know that it’s cost the employer nothing.
    Bound to be bad feelings, particularly if they’ve been getting the $750 for a no show.

  9. mem

    Just get out of the way. Australians want to get on with it (work, business, public, private life) unimpeded by academic and bureaucratic policy and research hustlers who are smelling grants and prestige. No, we don’t need you, nor do we want you. To repeat get out of the way. It’s like all the cockroaches have crawled out from under the carpet at once, thinking the populace is weak and they can now gnaw on their bones.

  10. Infidel Tiger King

    I can’t see how it can work.
    If an employee does $750 or less work in a week, they know that it’s cost the employer nothing.
    Bound to be bad feelings, particularly if they’ve been getting the $750 for a no show.

    Don’t worry.

    All those people are getting fired on September 30th.

  11. mark

    Professor Fred Lenin
    “Sinclair cany you please answer the following questions most laymen dont understand.
    From whom or what does the government “borrow ” these monstrous amounts ?
    To whom is the interest on the borrowing paid?
    Has a government ever in history paid back these huge sums ?”

    Good questions. Speaking as a layman the answers interest me muchly

  12. yarpos

    A small anectdote from regional VIC. In an Aldi they vetted a group of people and made offers to 4. 3 out of 4 declined because they could get more sitting at home. Not sure what they will do for the rest of 2020 , but whatever it is it wont be at Aldi. Bit silly really they pay much better than others in retail, but such is the thinking of the “if its for free, its for me!” brigade.

  13. Bad Samaritan

    Nah. All this worrying about huge deficits and even huger debts is misplaced….

    After many years studying the dismal science, believing that Keynesians had it horribly wrong I was kinda worried a decade ago when the ALP started wrecking the old order….but nothing detrimental happened, did it? Likewise the US with QE…where nothing has happened. And, of course Japan where it’s been about 30 years of non-stop increases in the national debt….and nothing has happened. Inflation is nowhere to be seen…and the interest rates are zero.

    If the US currency was in the toilet. If the yen was in the basement. If inflation was running rampant. if, if, if…then maybe I’d still be convinced that balanced budgets were the way to go. However….

    Then, sometimes-sensible people started with their crypto-currency fad: create as much “secret money” as you like; have it worth $A 25,000 one day, and $10,000 a week later…hand over your life savings to some Nigerian Prince to get virtual cash and you’d be sweet….and that’s the way of the future! Nah..I prefer something more “reliable” than an African Aristocrat’s word.

    The RBA issues money; the comm govt takes it and hands over IOUs (bonds) to the RBA. The govt spends the dough, and in a few years time the RBA forgives the debt.

    Again a folksy example; son finds a bag of money. Dad borrows from son to give mum an allowance while she’s outta work. She spends it and eventually goes back to work. Son tells dad “I’m letting you off on that debt”. Why does this end in disaster?

  14. Infidel Tiger King

    Nah. All this worrying about huge deficits and even huger debts is misplaced….

    And that’s when we knew the drugs had kicked in.

  15. Ed Case

    In an Aldi they vetted a group of people and made offers to 4. 3 out of 4 declined because they could get more sitting at home.

    That’s JobSeeker [the dole], not JobKeeper.
    Aldi is a casual job, Jobseeker reduces 50c for every dollar earned, though maybe they’ve got something better to go to once the restrictions ease.

  16. Davo the spy

    just go to the greens’ ‘money tree’

  17. Bad Samaritan

    ITK (5.16pm). Are you gonna tell us what bad things happened to the US and japan with all their money-printing and debt?

    i’m interested in how you see it….without my hallucinatory drugs in the mix!

  18. Infidel Tiger King

    ITK (5.16pm). Are you gonna tell us what bad things happened to the US and japan with all their money-printing and debt?

    Japan has had three decades of stagnation.

    The USD is the world’s reserve currency so they can probably keep on printing for another 50 years or at least until they lose reserve status.

  19. JC

    Bad S

    In your missive, you appear to be co-mingling QE and deficit spending. The two are not the same. The operations are not one side of government simply handing over paper to be printed as it doesn’t work like this and neither does the market believe it is like this.

    QE. The RBA buys government bonds or even private paper in the market and then issues money to those selling them securities.

    Deficit Spending. The RBA sells bonds in the open market and takes in money. This money is then moved to the Treasury’s account at the RBA.

  20. mark

    JC

    So where does the RBA get the money to buy the government bonds ? Where does this money come from and who is it that ultimately gets repaid (charges interest etc) ?

    genuine question

  21. mh

    The nation is now on sit-down money.

    Closing the gap.

  22. Infidel Tiger King

    We will all be living an aboriginal existence at the end of the year.

  23. Ed Case

    QE. The RBA buys government bonds or even private paper in the market and then issues money to those selling them securities.

    Deficit Spending. The RBA sells bonds in the open market and takes in money. This money is then moved to the Treasury’s account at the RB

    Thanks for that explanation.
    My only query is this: is Deficit spending a necessary part of the QE system to get rid of the Bonds?

  24. Ed Case

    We will all be living an aboriginal existence at the end of the year.

    That could be either good or not so good.
    Any idea how committed the Chinese are to the ideals of Reconciliation?

  25. Neil

    Technically they weren’t “debt free” -they kept some Commonwealth bonds on issue to keep liquidity in the bond markets, but their net position was positive,

    Correct. Howard could have taken Gross debt to zero but was told not to. So he kept $50-55B on issue and then reinvested the money. So in 2007 we had some Gross debt but Net debt was zero

    Fifteen years ago the decision was taken to maintain the Australian sovereign bond market at around $50 billion, despite a run of budget surpluses that would have eventually enabled gross debt to be fully repaid.

    https://www.aofm.gov.au/publications/speeches/changing-issuance-and-debt-management-landscape-what-matters-most-next-sydney

  26. MatrixTransform

    All those people are getting fired on September 30th.

    not all of them.
    Our company qualifies for the jobSleeper … so we are claiming it.
    don’t need it necessarily.
    don’t want it necessarily
    but the govt is spewing free money to everybody else
    so we are going to take it.

    so anyway, thanks it will definitely help

    … last man standing

  27. Rex Anger

    Any idea how committed the Chinese are to the ideals of Reconciliation?

    @ Ed Case- You might want to ask the Tibetans and the Uyghurs and the Mongolians about that. I suspect given the calibre of likely replies, you might need to bring a lot of beer, and have a sturdy door to lock behind you.

  28. Rex Anger

    Flying bottles and bad language could be the least of one’s worries.

  29. Ed Case

    You might want to ask the Tibetans and the Uyghurs and the Mongolians about that. I suspect given the calibre of likely replies, you might need to bring a lot of beer, and have a sturdy door to lock behind you.

    O/T:
    China has been around a long time.
    Sinkiang was China’s, the Uighurs were Buddhists before they were Ropers, and they’re still not natives.
    Tibet was conquered by the Mongols, who appointed the Buddhist priesthood as rulers. The Mongols also ruled China at that time.

  30. Rex Anger

    And none of them are really reconciled… 😉

    Tell you what though, I’ll take Mongolian throat singing (especially with rock/metal backing) over Chinese opera any day of the week, and twice on a Friday night.

    https://m.youtube.com/watch?v=jM8dCGIm6yc

  31. min

    And Labor wants to raise wages . For all you SFRs out there Term deposits .8 % or under interest rate .

  32. Squirrel

    There may be a vestigial Jobkeeper for sectors such as travel – assuming that the international borders stay closed for a few years – but the rest of it will have to go for compelling fiscal reasons.

    Less easy to get rid of fully and forever will be the double-dole and “free” childcare. Those genies will not be going back into the bottle for good – if not before, both will be front and centre at the next federal election.

    Unless the international markets force our hand, the best that can probably be hoped for is a moderately larger public sector, but with some offsetting of increased program costs by reduced administration costs.

  33. Rex Anger

    Welp, it will be electoral poison for whomever wants to do away with it- ScoMo or Albo.

    Aside from the obvious ticket-punching and “Think of the Cause” moments one must sear one’s conscience with to move up, who the hell would want to get into politics?

  34. Louis Litt

    Bad Samaritan
    This is what I am seeing on da street when govt deficit is high.
    Business owners are taking home less money than their managers – thus there is no return on the money they invested in the business.
    Prices of goods and services has not increased as the business owner says no one will buy their product or service.
    Business owner was to put money into super but does not have the cash to do it, if he can the tax deduction is reduced from$50k to $25k and if he earns more than $200k he pays 30% on the super – except for govt employees who are too important for that
    Business man buys a property, does it up either to rent out or move into to- land tax
    Business man wants to employ additional person – payroll tax
    Business man want to employ over seas labour -$7k fee to govt dept to consider this
    Business man wants to take money out – higher tax rate which the laws push on you
    Business man want to do business with another business and take them out for a bite – fringe benefits tax
    Businessman wants to sell his business capital gains tax
    Labour does not want you to have private health insurance but will hit you with a surcharge if you don’t have it and earning over $90k
    Govt spending is not on productive area,s eg commercial ship building, mining, agriculture, engineering
    Govt wages are higher than private sector and increasing
    Do not employ govt employees as they work at 1/3 of the pace as you and know 1/3 of what you expect them to know
    Redundancy is so high it bankrupt businesses – who started taxing this Paul Keating
    Employee dream in Oz get employed by Holden or govt suit around and winge and hope to get made redundant- result get paid $200k
    As businesses are not earning they don’t buy a better house
    Managers buy a bigger house than owner – but can not afford to it
    Rather than selling the home and downsizing RBA.Cut interest rates so low you can just afford it
    Meanwhile people in their 70s retire and hope to earn 5% on $500k but are only earning 1%
    Retirees are too frightened to spend money now
    Young people say they can’t find work and oldies are living in suburbs they want to live in – the oldies are not allowed to own these homes and should go into retirement village
    Probs with retirement village the oldies only get back 50% or 75% of their initial investment
    Young people scream this is a rip off as they factored in an inheritance wind fall
    On death the surviving oldie has to pay tax on what super they have left
    You have been Litt up,

  35. flyingduk

    If the US currency was in the toilet. If the yen was in the basement. If inflation was running rampant. if, if, if…then maybe I’d still be convinced that balanced budgets were the way to go. However….

    ALL fiat currencies are in the toilet. When i walked home from school in 1973, the Pine Lime Splice cost 17c, now its over 3 dollars. Inflation is very real, the government has stripped 95% of the value out of the dollar in my lifetime. This is why everyone is forced into ‘super’, or the stock market, or the property market in order to try to save for retirement. You cannot store wealth in our currency any more.

  36. flyingduk

    So where does the RBA get the money to buy the government bonds ? Where does this money come from and who is it that ultimately gets repaid (charges interest etc) ?

    They simply conjure it up out of thin air by typing it into a screen. If you or I do that, its called counterfeiting and is illegal because it creates no new wealth, it merely steals purchasing power from all the existing money. Printing a dollar, physicially or electronically bears the same relationship to money as a piece of paper with ‘food’ written on it does to food: you cant eat it, and printing more doesn’t mean you have more food.

  37. flyingduk

    All those people are getting fired on September 30th.

    Sure they are!! By the governments own figures, the ‘workforce’ totals 12 million in Australia. Of that, 6 million are on ‘jobkeeper’ and 1 million on ‘jobseeker’. In a democracy, you are going to get outvoted. None of these payments are ever going away. They will morph into ‘UBI’ or ‘mental health support payments’ or ‘economy transition support’ or whatever the focus groups settle on.

    Make no mistake, there is no going back from this.

  38. candy

    Rolling back Jobseeker will be one of the hardest things, harder than flattening the virus curve.

  39. flyingduk

    From whom or what does the government “borrow ” these monstrous amounts ?

    They ‘borrow’ it from the Reserve bank, but the liability is yours, not theirs! The treasury issues a bond (which is a debt contract, like a mortgage) and the RBA ‘buys’ it with currency printed out of thin air. You, the taxpayer, is then on the hook for the regular interest payments and eventually, the principle.

    Worse still, because all ‘money’ is now created by issuing debt, it can NEVER be paid back because even if you pay the principle back completely, there has been an interest bill accrued as well, and THAT has to be paid back by creating more currency by issuing a new bond… now you see?

  40. Neil

    They ‘borrow’ it from the Reserve bank, but the liability is yours, not theirs! The treasury issues a bond (which is a debt contract, like a mortgage) and the RBA ‘buys’ it with currency printed out of thin air.

    I don’t understand.

    70% of the bonds issued go to overseas investors. I thought most of the money was borrowed from foreign investors not the Reserve Bank

  41. Rebel with cause

    A UBI type arrangement would be alright if there was offsetting cuts to other welfare payments.

  42. Bronson

    Neil its simple it’s based on sovereign risk. As long as everybody believes a country is good to back the value of its currency as printed by the RBA and then lent to Treasury to be sold as bonds on the open market everything is fine. Foreign buyers can purchase the bonds based on the assessment that the issuing government is good to pay back the debt. When the market loses faith in the currency of a country, think of Zimbabwe, the whole scheme falls down and nobody will deal in the currency or its associated bonds

  43. Neil

    As long as everybody believes a country is good to back the value of its currency as printed by the RBA and then lent to Treasury to be sold as bonds on the open market everything is fine

    OK but i thought the guy was saying the RBA buys the bonds from Treasury. Whatever he said i did not understand it.

  44. Leo G

    The bottom line is that we as a nation simply cannot afford to pay people to sit at home and not produce

    The bottom line does seem to conceed that we can afford to pay people to sit at work and not produce.

  45. flyingduk

    Neil, once the Treasury issues a bond, anyone can, in theory, buy it. If you, I or some overseas investor buys it, they must do so with EXISTING currency. If the RBA buys it, they do so by creating new currency out of thin air. Its all meant to be hard to understand: if people knew the govt was effectively just counterfeiting dollars whenever it wanted to, it might cause unrest.

  46. Rayvic

    We have the health bureaucratic bullies to thank for using grossly invalid case-prediction models to coerce our politicians into implementing draconian lockdown measures, that in turn catastrophically destroyed hundreds of thousands of jobs.

    Ironically, the economic bureaucratic bullies responded by coercing our politicians to implement damage-control measures that in turn negligently amplify the economic damage.

  47. Neil

    Neil, once the Treasury issues a bond, anyone can, in theory, buy it. If you, I or some overseas investor buys it, they must do so with EXISTING currency.

    What?

    70% of aussie bonds are purchased by overseas investors

    30% are purchased by aussies

    I don’t think Treasury/RBA purchase anything

  48. flyingduk

    Sorry Neil, I know it doesn’t make much sense, that is how they want it. In effect, what is happening is the Government can simply ‘print’ money when it wants it, but it does so in a round about way to maintain the fiction that such expenditures are really just loans and will be paid back some day. Its a sort of ‘separation of money and state’ in the same way as ‘church and state’ are meant to be separated.

    What happens is the Government creates saleable loans called ‘bonds’ and sells them (initially) into the open market. The main buyers (initially) are the big banks, including overseas ones. This is why it appears that such debt is being sold to private entities, and explains your figures (eg 70% goes to OS investors). What then happens is these bonds can be onsold again. If the next buyer is another non government investor, nothing changes in terms of new currency creation, but a significant number are bought by the RBA as part of their monetary operations. In that case, they create new currency out of thin air to pay for it. This money effectively is transferrred to the government as new money. Try to understand that its all meant to be deliberately opaque to prevent the average citizen twigging to the fact that their government is basically counterfeiting money which is of course illegal, given it constitutes theft from the value of all previously existing currency.

  49. BorisG

    Sinc I am keen to read it but won’t subscribe just to read your priceless article. Especially given that you write to us for free.

    Can you post it somewhere?

  50. Bad Samaritan

    There seems to be a lot of confusion about the current deficit spending and how it’s being financed…..

    I explained it already, but since Cats need a news article as “proof”, here it is……ABC 7th April 2020…

    “In recent weeks the Reserve Bank has been buying government bonds. It may do this via an agreement with one of the big four banks, or maybe with a fund manager — anyone that has been holding the bonds in bulk. It’s been doing this by “expanding its balance sheet”………Now that the Reserve Bank has a licence to print money, it is going into the three-year bond market and buying up bonds.…This is what’s known as buying bonds in the secondary market…..If the RBA bought bonds directly from the Government it would, in effect, be directly funding the Government. And that’s clearly not on…….The Reserve Bank has already bought tens of billions of dollars of bonds, but by the time it’s finished, both variable and fixed rate mortgages, as well as business loans of all shapes and sizes, should all be even lower than they are today, and, most importantly, will remain low for years……This is because it’s government debt that the Reserve Bank is ultimately making cheaper by buying its bonds.”

    That was seven weeks ago and the process has been rolling ever since.

    OK, guys, so when I explain it as an accountancy sleight-off-hand you should all listen up. I will not mislead you…as I never mislead you! Just get ir right first time; every time…and all will run smoothly…

    The RBA is “printing money” to buy bonds issued by the Comm Govt: generally through an intermediary. Nett result: the RBA has the bonds (via a circuitous route)…which it can choose to not redeem in future if it so decides= no actual future debt repayment obligation for the Commonwealth if the RBA so decides. Got it?

  51. Neil

    OK i still don’t get it. So the RBA is now printing money. This cannot end well

  52. Neil

    I read somewhere that the Fed in the USA is now intervening in the stock market and buying shares. The suspect the RB is doing the same thing here with our share market

    Artificially propping up anything is a bad idea

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