Australia’s government will pump a further A$20 billion ($14 billion) into supporting the jobs market as a surge in coronavirus infections threatens to prolong the nation’s first recession in almost three decades.
The government’s signature wage JobKeeper subsidy program, which is currently supporting about 3.5 million workers, will be extended by six months until the end of March, albeit at a lower rate, Prime Minister Scott Morrison said Tuesday. A supplement to unemployment benefits will also be extended, again at a lower rate.
The JobKeeper program, unveiled under a massive stimulus package in the early days of the coronavirus crisis, has “saved businesses and it has saved livelihoods,” Morrison said in Canberra. The amended plan marked the “next step in our journey” to dealing with the economic fallout of the virus, he said.
After initial success in containing the virus, Australia is battling a second wave in Victoria state, which has forced around 5 million people in Melbourne back into lockdown. The shutdown of the nation’s second-biggest city, which contributes about one-quarter of GDP, threatens to derail the economic recovery.
Victoria state Premier Daniel Andrews said Tuesday 374 new infections had been detected in the past 24 hours, the second worst daily rise. A further three people had died from the virus, bringing the state’s death toll to 42.
Morrison is providing a framework of ongoing stimulus ahead of the government’s economic and fiscal update Thursday, where it it expected to unveil the biggest budget blowout since World War II. The extension of the wage subsidies and unemployment payments will allay fears of a fiscal cliff emerging whereby struggling firms and households are suddenly left without cash.
As the coronavirus continues to pummel the economy, Australia’s jobless rate climbed to a 22-year high of 7.4% in June. However, taking into account people who have left the workforce or are on zero hours, the effective unemployment rate is at 11.3%, Treasurer Josh Frydenberg said Tuesday.
JobKeeper has seen the government pay wage subsidies of A$1,500 every two weeks per employee to help struggling firms keep people in work.
It will have two tiers from the end of September to better reflect the hours people work. The payment will initially fall to A$1,200 for full-time workers, and A$750 for those working less than 20 hours per week. And from January to the end of March, it will be cut again to A$1,000 and A$650.
By the March quarter of 2021, about 1 million people will still be on the JobKeeper program, Frydenberg said.
The supplement to the JobSeeker unemployment benefit will also be cut to A$250 from A$550 in September and will run until the end of the year.
In its review of the JobKeeper program, Treasury said it had been effective and recommended it be extended.
But it also said the program had altered wages relative to the amount of hours worked, potentially blunting a person’s incentives to work, or to take on more hours.
It also said that the introduction of extra income support under JobSeeker may be affecting incentives to work.
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