When the facts change …

This morning an op-ed in the AFR caught my eye. It is by Steven Hamilton and Chris Edmond. They make the argument that the $130 billion $70 billion JobKeeper program can be finetuned.

By deleting just two words in the JobKeeper regulations, eligibility could move from being once-and-for-all to being month-by-month. If a business expected revenue to recover in the following month, they would no longer qualify. This wouldn’t preclude them from qualifying again later should economic conditions deteriorate.

This fix would only withdraw support from those businesses no longer truly in need, and stamp out the rumoured profiteering. It would serve as an economic stabiliser, responding to changing economic conditions automatically.

They also suggest that it can be extended to other currently excluded workers and beyond September.

What I find puzzling, however, is that one of the two authors had an op-ed at the SMH just two weeks ago arguing the opposite point.

There are clear flaws in the current system, and for many businesses it could be wound up earlier as the outlook has changed somewhat for the better. But the government made a clear commitment to these millions of businesses and workers to maintain a certain level of support for the full six months.

The last thing anyone needs right now, when the confidence of consumers and businesses is more critical than ever, is to have the government pull the rug out from under them.

So clearly he has changed his mind. But why?

The stunning revelation that the JobKeeper wage subsidy is supporting only half the jobs and costing half as much as the government thought is of course embarrassing. And it’s genuinely concerning that the government and Reserve Bank relied on these numbers to get a read on the state of the economy and to calibrate policy.

We should seize the revelation of this massive error as an opportunity to fix some of the by now obvious problems with JobKeeper.

Well – the $60 billion stuff-up is embarrassing. Terry McCrann has views:

The head of Treasury, Steven Kennedy, and ATO Commissioner Chris Jordan must both be sacked for either deliberately misleading the Australian public or breathtaking incompetence the like of which I doubt we have seen before, or arguably both.

I’m in two minds – yes it is a monumental stuff-up, but we don’t want to discourage the bureaucracy from finding and reporting $60 billion windfalls. Mind you – it’s not actually a windfall.

The point is – I’m not convinced that under-spending borrowed money is reason enough to either extend the JobKeeper program or to fine tune it. Steven Hamilton’s certainty argument of two weeks ago is still valid today.

What is going to be challenging, however, is that the JobKeeper program ends before the budget will be brought down. I don’t know if that timing works.

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14 Responses to When the facts change …

  1. a happy little debunker

    There should also be a gradual winding back of jobseeker, to boot.

  2. stackja

    And a refund from all the virus “experts”?
    Heard story about the badly designed forms created confusion.
    Form designers called to account?

  3. Colin Suttie

    “Form designers called to account?”

    Called to account? How quaint.

  4. Entropy

    . If a business expected revenue to recover in the following month, they would no longer qualify.

    How do these geniuses plan to find that little criterion out?

    It would either create enormous moral hazard and perverse incentives, or cost hundreds of millions to police.

  5. BoyfromTottenham

    If I budgeted to pay $1 million for a house, and perchance found one that suited me for $600,000, I would be very happy to have saved $400,000, not unhappy that I didn’t spend the full million that I had budgeted. This reminds me strongly of the same bass-ackwards logic in the old joke about the Scotsman who complained, when tram fares were reduced, because he would save less by walking!

  6. Sean

    Speaking with the MD of the company I work for. A few of his friends have put in the form based on worse case and not needed/unable to claim because they didn’t end up meeting the criteria for turnover drop off.

    Some places with turnover of 1 billion also might not yet have received the full flow on of effects of the lock-down but potentially will be eligible to claim in the near future.

  7. yarpos

    What got me were the dills who immediately thought they had a spare 60Bill to spend. Sort of like a woman who has finally paid of her credit card.

  8. Entropy

    They will end of spending that $60b. The senate will demand it. For example, keeping jobseeker going for longer.

  9. Entropy

    BoyfromTottenham
    #3465721, posted on May 27, 2020 at 3:46 pm
    If I budgeted to pay $1 million for a house, and perchance found one that suited me for $600,000, I would be very happy to have saved $400,000, not unhappy that I didn’t spend the full million that I had budgeted. This reminds me strongly of the same bass-ackwards logic in the old joke about the Scotsman who complained, when tram fares were reduced, because he would save less by walking!

    It is sleek into the mind of finance warriors in government departments. I was once hauled over the coals by being 20% under the published administration cost target of a program I was running. It didn’t go down well when I made it plain I didn’t see it as a problem and clearly looked down on them.

  10. Squirrel

    The $130bn. estimate for Jobkeeper was given in the same 30 March press conference that the scheme itself was announced –

    https://www.pm.gov.au/media/130-billion-jobkeeper-payment-keep-australians-job

    https://www.pm.gov.au/media/press-conference-australian-parliament-house-act-14

    At best, that figure could only have been a very rough guesstimate at that stage, because the scheme was a response to truly unprecedented circumstances.

    I don’t think anyone should be sacked as a result of that guesstimate, but I am rather puzzled by the “dog ate my homework” explanation, about lots of small firms reporting that they had 1500 times as many eligible employees as they actually have, which have since been put forward to explain an estimate almost double the likely cost.

    How could an estimate have been based on forms which, at the time the estimate was first publicly given, didn’t exist (and thus could not have been filled in wrongly or otherwise) because the scheme to which those forms relate had only just been announced…..?

  11. MatrixTransform

    This fix would only withdraw support from those businesses no longer truly in need

    …if the govt is giving money to my competitors (and employees) and at the same time my company either doesn’t need it or doesnt want it then, it is not in our best interest to refuse it.

    all they’re doing is propping up up zombies.

    retards, the lot of ’em

  12. Sean

    They just need to ease restrictions to let the economy get back up and running.

    Track and trace clusters and promote physical distancing, stay at home if feeling sick and vigilant hygiene.

  13. candy

    They will end of spending that $60b. The senate will demand it. For example, keeping jobseeker going for longer.

    I think Entropy is right there. PM Morrison has signalled it’s time for consensus and accord, and if the unions ask for the jobseeker to continue as is, he surely will have to do that, as a matter of good faith in the New Accord. He has ceased the legislation to ban rogue unions – now they will ask for something back.

  14. Fair Shake

    So there it is. I work for a company which has a network of retailers. In those crazy last two weeks of March I thought we were all cooked. Business switched from profit models to staying alive. Then as the Government shut the community down it started doling out the cash. The numbers are in. Our retailers have done alright. Better than a normal April. The country retailers have gone gangbusters. This has occurred across our industry. Yes some retailers lost $ but there are always poor operators or brands out there. The industry is keeping mum on this. Remember, it’s only a rort if you’re not in on it. Then again if Government decides to meddle and fix things, what could go wrong?

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