tag:theconversation.com,2011:/us/topics/commonwealth-budget-2020-86935/articlesCommonwealth Budget 2020 – The Conversation2020-11-09T19:05:54Ztag:theconversation.com,2011:article/1489802020-11-09T19:05:54Z2020-11-09T19:05:54ZJobMaker is nowhere near bold enough. Here are four ways to expand it<figure><img src="https://images.theconversation.com/files/368076/original/file-20201107-19-1ya5fvk.jpg?ixlib=rb-1.1.0&rect=1046%2C260%2C2613%2C1706&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">AlessandroBiascioli/Shutterstock</span></span></figcaption></figure><p>The government has targeted its <a href="https://budget.gov.au/2020-21/content/factsheets/download/jobmaker_hiring_credit_factsheet.pdf">JobMaker Hiring Credit</a> too narrowly.</p>
<p>The scheme to go before the Senate this week will give employers who take on someone aged 16 to 29 years who has been on JobSeeker or a related benefit a bonus of A$200 per week, and a bonus of $100 per week if the person is aged 30 to 35 years.</p>
<p>New hires older than 35 won’t attract a bonus, and nor will new hires who have been out of work but not on JobSeeker.</p>
<p>The bonus will last for up to a year.</p>
<p>There are reasons to focus on young people. Youth unemployment is 14.5%, almost double the economy-wide average, and young people have lost more working hours than older people.</p>
<p>Also, young people will arguably be scarred for longer by the experience of unemployment (although many older people will be scarred for just as long or longer, never returning to work).</p>
<p>But Australians aged 35 and younger make up less than half of those on JobSeeker.</p>
<p>Most – about 800,000 of the 1.5 million – are older than 35.</p>
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<span class="attribution"><a class="source" href="https://grattan.edu.au/wp-content/uploads/2020/10/Submission-JobMaker-26-October-2020.pdf">Grattan Institute, DSS</a></span>
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<p>With Victoria reopening, summer coming and the treasurer talking confidently about “fighting back”, it is easy to forget how serious our unemployment problem is.</p>
<p>Unemployment is at 6.9%, the highest it’s been this century. If the thousands working zero hours on JobKeeper were included, it would be higher still. Even without including those people, treasury the unemployment rate to reach <a href="https://budget.gov.au/2020-21/content/bp1/download/bp1_bs2.pdf">8%</a> by Christmas. </p>
<p>Official forecasts say unemployment won’t fall to 5.5% for three-and-a-half years, until mid 2024, an extraordinarily <a href="https://grattan.edu.au/news/no-snapback-australia-is-heading-for-an-unreasonably-slow-recovery/">slow recovery</a> by the standard of previous downturns.</p>
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Read more:
<a href="https://theconversation.com/in-defence-of-jobmaker-not-perfect-but-much-to-like-147898">In defence of JobMaker: not perfect, but much to like</a>
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<p>JobMaker as presently configured won’t do enough to speed it up. </p>
<p>The budget speech said the hiring credit would support around <a href="https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/speeches/budget-speech-2020-21">450,000</a> jobs , but treasury has since told a Senate hearing that only about 10% of those jobs will be jobs that wouldn’t have been created anyway – <a href="https://www.theguardian.com/australia-news/2020/oct/26/jobmaker-will-create-just-10-genuinely-additional-jobs-of-coalitions-total-pledge-treasury-says">about 45,000</a>.</p>
<p>In our <a href="https://grattan.edu.au/submissions/jobmaker-needs-to-be-more-ambitious/">submission</a> to the Senate inquiry into JobMaker we recommended four fundamental changes.</p>
<h2>1. Open it to all ages</h2>
<p>Opening the scheme to new employees of all ages, not just those age 35 or younger, could more than double the reach of the scheme. </p>
<p>It would also roughly double its cost, from $4 billion to roughly $8 billion, but that cost would remain <a href="https://theconversation.com/now-well-need-100-120-billion-why-the-budget-has-to-spend-big-to-avoid-scarring-145489">modest</a> in the context of the government’s stimulus spending to date.</p>
<p>Targeting younger workers would make sense if expenditure needed to be highly constrained, but with a need for more government spending rather than less there is no point in making the subsidy available to only some of the people who could benefit from it.</p>
<h2>2. Extend it beyond the unemployed</h2>
<p>Limiting the credit to jobs filled by new hires who have been on JobSeeker or a related payment is unnecessarily constraining. </p>
<p>If the most suitable candidate for a role is already employed, hiring that person provides an opportunity for someone else to fill their old position. If it is a new job, it is likely to ultimately put an unemployed person into work. </p>
<p>The goal ought to be to strengthen overall labour demand, not to encourage only the subset of job creation where the new job happens to be a good match for someone presently unemployed.</p>
<h2>3. Allow more employers to use it</h2>
<p>The scheme requires employers to demonstrate that new hires have boosted payroll beyond where it was in the three months to September 30 2020.</p>
<p>But the payroll baseline is defined as including jobs supported by <a href="https://theconversation.com/the-key-to-the-success-of-the-130-billion-wage-subsidy-is-retrospective-paid-work-135042">JobKeeper</a>. </p>
<p>As firms become ineligible for JobKeeper, and the payment rate is reduced <a href="https://treasury.gov.au/coronavirus/jobkeeper/extension">in January and again in March</a>, many businesses that relied on the payment will have to lay off staff. As a result, they will have an actual payroll bill well below where it was in the three months to September 30 2020.</p>
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Read more:
<a href="https://theconversation.com/budget-2020-promising-tax-breaks-but-relying-on-hope-147012">Budget 2020: promising tax breaks, but relying on hope</a>
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<p>This will effectively <a href="https://grattan.edu.au/wp-content/uploads/2020/10/Submission-JobMaker-26-October-2020.pdf">exclude them from the scheme</a>, giving them no extra incentive to retain staff as they come off JobKeeper, or to increase working hours or hire more staff as conditions improve.</p>
<p>The government should ease the criteria to require employers to only demonstrate that they have boosted payroll <em>net</em> of JobKeeper receipts.</p>
<h2>4. Ban ‘harvesting’</h2>
<p>The test should be more demanding. As designed, employers can claim back up to 100 per cent of an increase in their payroll, which creates incentives for employers to “harvest” credits by converting full-time jobs to part-time.</p>
<p>As an example, an employer who reduces the hours of an existing employee from 40 per week to 20, while hiring two new employees at 20 hours each would be able to claim the hiring credit twice – despite total hours worked and wages paid increasing by only one 20 hour job. </p>
<p>This could be fixed by requiring each new hire to boost payroll by a multiple of credit paid.</p>
<h2>A better, simpler model</h2>
<p>A better model would be to simply pay employers a proportion of their payroll growth, as proposed by economist <a href="https://www.afr.com/policy/economy/how-jobstacker-could-replace-jobkeeper-in-the-budget-20200904-p55slx">Peter Downes</a>.</p>
<p>Our calculations suggest that as presently designed JobMaker will skew employment towards lower-wage, part-time jobs. </p>
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<a href="https://images.theconversation.com/files/368238/original/file-20201109-13-jb7o61.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/368238/original/file-20201109-13-jb7o61.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/368238/original/file-20201109-13-jb7o61.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=378&fit=crop&dpr=1 600w, https://images.theconversation.com/files/368238/original/file-20201109-13-jb7o61.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=378&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/368238/original/file-20201109-13-jb7o61.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=378&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/368238/original/file-20201109-13-jb7o61.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=475&fit=crop&dpr=1 754w, https://images.theconversation.com/files/368238/original/file-20201109-13-jb7o61.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=475&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/368238/original/file-20201109-13-jb7o61.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=475&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="attribution"><a class="source" href="https://grattan.edu.au/wp-content/uploads/2020/10/Submission-JobMaker-26-October-2020.pdf">Sources: Fair Work Commission, ABS and Grattan Institute calculations</a></span>
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<p>A rebate on additional payroll would instead encourage employment growth of all types – full-time as well as part-time, and extra hours worked by existing staff. </p>
<p>But even such a better-designed credit won’t help much if there’s weak demand for workers. To get it, we will need more stimulus, more government spending.</p>
<h2>Either way, we’re going to have to boost the economy</h2>
<p>Our estimate is that an extra <a href="https://theconversation.com/no-snapback-the-budget-sets-us-up-for-an-unreasonably-slow-recovery-heres-how-148098">$50 billion</a> would drive unemployment down to 5% and kickstart wage growth nearly two years ahead of the government’s schedule. </p>
<p>There are plenty of <a href="https://grattan.edu.au/news/budget-2020-unfinished-business-in-a-business-friendly-blueprint/">good options</a> for doing it, and a more ambitious JobMaker is one of them.</p><img src="https://counter.theconversation.com/content/148980/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments, $4 million from BHP Billiton, and $1 million from NAB. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and contribute to funding Grattan Institute's activities. Grattan Institute also receives funding from corporates, foundations, and individuals to support its general activities as disclosed on its website.</span></em></p><p class="fine-print"><em><span>Matthew Cowgill and Tim Helm do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>It isn’t available to the bulk of the unemployed, it isn’t available to people who’ve been on JobKeeper rather than JobSeeker, and employers can overclaim.Brendan Coates, Program Director, Household Finances, Grattan InstituteMatthew Cowgill, Senior Associate, Grattan InstituteTim Helm, Senior Associate, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1475802020-10-06T23:51:12Z2020-10-06T23:51:12ZBudget 2020: big health problems lead to big health spending<p>The pandemic – and developments in health care – have forced the Commonwealth government to commit to a massive increase in spending on health care this year.</p>
<p>In the 2019-20 budget, the Commonwealth promised an increase of A$540 million in health spending in 2020-21. In this year’s version, delivered by Treasurer Josh Frydenberg last night, the promise is an order of magnitude greater: an uplift of $5.347 billion since the last economic statement. </p>
<p>During 2020-21 and 2021-22, likely to be the biggest years for the COVID-19 response, the Commonwealth is promising almost $10 billion of extra spending. Never before has the federal government opened the health purse strings to this extent.</p>
<p>Although there are 35 items in the health <a href="https://budget.gov.au/2020-21/content/bp2/index.htm">budget measures table</a> – all detailed in a 163-page “<a href="https://www.health.gov.au/sites/default/files/documents/2020/10/budget-2020-21-stakeholder-pack.pdf">Stakeholder Pack</a>” – just five of them account for 94% of the increase in spending.</p>
<h2>1. Pharmaceutical Benefits Scheme (PBS)</h2>
<p>The government has committed to listing on the PBS all new drugs recommended as cost-effective. Even though each new drug must meet a cost-effectiveness threshold, the PBS spend is the biggest item in the health budget: $4.3 billion over the next two years, and more in the years beyond. </p>
<p>Although drug listings have been <a href="https://www.greghunt.com.au/life-changing-medicines-listings-to-save-cystic-fibrosis-patients-up-to-250000-a-year/">politicised recently</a>, they are in fact technocratic decisions based on clinical, epidemiological and economic analysis.</p>
<p>The difference this year is the government is committing funds in advance for new listings, with a “PBS New Medicines Funding Guarantee”. In essence, this means Treasury has given up trying to extract savings from the health portfolio to offset the cost of new drugs. The cost of this new guarantee may be partly reduced by a price drop for medications approaching the end of their patent, with an increased price cut after 15 years.</p>
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Read more:
<a href="https://theconversation.com/how-to-slash-half-a-billion-dollars-a-year-from-australias-drugs-bill-73050">How to slash half a billion dollars a year from Australia's drugs bill</a>
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<h2>2. COVID-19 vaccines</h2>
<p>No one knows if or when a COVID-19 vaccine will be proven to work, which one of the hundreds of candidate vaccines it will be, when it can be manufactured at scale, or how it will be <a href="https://theconversation.com/why-vaccine-nationalism-could-doom-plan-for-global-access-to-a-covid-19-vaccine-145056">distributed across the world</a>. The government seems to be banking on <a href="https://theconversation.com/the-budget-assumes-a-covid-19-vaccine-becomes-available-next-year-is-this-feasible-147557">mid-2021 for a vaccine</a>, with population vaccination programs to follow shortly after that. </p>
<p>However, the government has also made contingency plans, allocating almost $2 billion over the next two years for licensing, production and distribution of a successful vaccine. There is no allocation for 2022-23 and beyond, so the government is either hoping the coronavirus will pack its bags and go, or waiting to see whether future budget allocations will be necessary.</p>
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Read more:
<a href="https://theconversation.com/the-budget-assumes-a-covid-19-vaccine-becomes-available-next-year-is-this-feasible-147557">The budget assumes a COVID-19 vaccine becomes available next year. Is this feasible?</a>
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<h2>3. Medicare Benefits Schedule (MBS)</h2>
<p>The pandemic brought forward implementation of new ideas into the MBS — most notably <a href="https://theconversation.com/how-the-old-fashioned-telephone-could-become-a-new-way-for-some-to-see-their-doctor-142474">telehealth</a>. The government has allocated $1 billion for extending some MBS items in 2020-21. </p>
<p>The optimistic interpretation is that the government is already planning to extend this extra MBS funding 2020-21, and is spacing out the announcements to maximise positive publicity. The stark reality, though, is there is no budget provision for these needed items beyond this financial year. </p>
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Read more:
<a href="https://theconversation.com/how-the-old-fashioned-telephone-could-become-a-new-way-for-some-to-see-their-doctor-142474">How the old-fashioned telephone could become a new way for some to see their doctor</a>
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<h2>4 & 5. Aged care</h2>
<p>The budget has two large aged care items: a one-off COVID response of $733 million, and a longer-term aged-care reform package worth more than $1 billion over the next two years, which will fund additional “<a href="https://www.myagedcare.gov.au/help-at-home/home-care-packages">home care packages</a>”, assistance to older Australians to help them stay at home rather than be admitted to residential aged care. The assistance might include nursing care, allied health, personal care or help with house cleaning. </p>
<p>Although 23,000 more packages are funded in the budget, that is woefully inadequate. About <a href="https://www.gen-agedcaredata.gov.au/www_aihwgen/media/Home_care_report/Home-Care-Data-Report-3rd-qtr-2019-20-PDF.pdf">75,000 older Australians are waiting for a home care package</a>, and a further 25,000 are waiting for a higher-level package which they have been independently assessed as needing. The home care budget allocation is welcome, but doesn’t meet the enormous need.</p>
<p>The government has kicked into the long grass the challenge of addressing the litany of failures in residential aged care identified by the Royal Commission on Aged Care Quality and Safety. Any such decisions are deferred until the royal commission reports its findings next year – meanwhile condemning thousands of older Australians to live in facilities with <a href="https://agedcare.royalcommission.gov.au/publications/research-paper-1-how-australian-residential-aged-care-staffing-levels-compare-international-and-national-benchmarks">demonstrably substandard staffing</a>.</p>
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Read more:
<a href="https://theconversation.com/federal-government-did-not-prepare-aged-care-sector-adequately-for-covid-royal-commission-147307">Federal government did not prepare aged care sector adequately for COVID: royal commission</a>
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<h2>Hospitals</h2>
<p>Outside the health portfolio, the government has allocated an extra $1.1 billion to the states as part of the <a href="https://www.coag.gov.au/sites/default/files/communique/covid19-npa.pdf">50-50 cost-sharing deal for the COVID-19 response</a>. This pays for additional <a href="https://theconversation.com/icu-ventilators-what-they-are-how-they-work-and-why-its-hard-to-make-more-135423">ventilators</a>, “<a href="https://theconversation.com/fever-clinics-are-opening-in-australia-for-people-who-think-theyre-infected-with-the-coronavirus-why-132599">fever clinics</a>” and other costs associated with meeting needs during and after the pandemic.</p>
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Read more:
<a href="https://theconversation.com/fever-clinics-are-opening-in-australia-for-people-who-think-theyre-infected-with-the-coronavirus-why-132599">'Fever clinics' are opening in Australia for people who think they're infected with the coronavirus. Why?</a>
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<h2>The rest: ‘rats and mice’</h2>
<p>There are 30 other items in the health budget measures table — many worthy, many important, too many simply the result of special pleading and successful lobbying. Each will be very welcome to the recipients. Some will yield measurable benefits and improvements in health care; and some will not.</p>
<p>The 2020-21 budget rightly includes a huge increase in spending responding to the pandemic. But even in these COVID-19 times, it should have also signalled the government’s commitment to fix the aged care mess with a down payment towards residential care reform, and given GPs — and their patients — more certainty about the future of telehealth.</p><img src="https://counter.theconversation.com/content/147580/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments, $4 million from BHP Billiton, and $1 million from NAB. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and contribute to funding Grattan Institute's activities. Grattan Institute also receives funding from corporates, foundations, and individuals to support its general activities, as disclosed on its website.</span></em></p>The search for a coronavirus vaccine and repairing the ailing aged-care sector are among the main health spends in the 2020 budget. But the biggest item was a $4.3bn pledge to subsidise many more drugs.Stephen Duckett, Director, Health Program, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1385272020-05-14T04:48:16Z2020-05-14T04:48:16ZWhat’ll happen when the money’s snatched back? Our looming coronavirus support cliff<figure><img src="https://images.theconversation.com/files/334908/original/file-20200514-167748-1lnq5xh.jpg?ixlib=rb-1.1.0&rect=362%2C164%2C2956%2C1268&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>At almost 10% of gross domestic product, and a much larger per cent of government spending, Australia’s fiscal response to the COVID-19 crisis has been <a href="https://blog.grattan.edu.au/2020/04/covid-19-australias-fiscal-response-is-now-among-the-biggest-in-the-world/">one of the biggest in the world</a>. </p>
<p>The government is spending an average of A$26 billion a month on programs that didn’t exist in February. </p>
<p>To put that in perspective, before COVID-19 the government’s total average monthly expenditure this financial year was going to be $42 billion.</p>
<p>While far from perfect, these emergency measures have been successful at supporting the incomes of many households and businesses.</p>
<p>But, as this chart shows, each and every one will be gone by the end of October, making October a very dangerous time for businesses and for the economy.</p>
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<p>In his <a href="https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/speeches/ministerial-statement-economy-parliament-house-canberra">address to parliament</a> on Tuesday, Treasurer Josh Frydenberg spoke of a return to work as restrictions were eased.</p>
<p>But he noted that any new outbreaks of COVID-19 could see restrictions re-imposed at a loss of more than $4 billion per week to the economy.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/334889/original/file-20200514-167736-1s0luk8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/334889/original/file-20200514-167736-1s0luk8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/334889/original/file-20200514-167736-1s0luk8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=971&fit=crop&dpr=1 600w, https://images.theconversation.com/files/334889/original/file-20200514-167736-1s0luk8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=971&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/334889/original/file-20200514-167736-1s0luk8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=971&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/334889/original/file-20200514-167736-1s0luk8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1220&fit=crop&dpr=1 754w, https://images.theconversation.com/files/334889/original/file-20200514-167736-1s0luk8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1220&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/334889/original/file-20200514-167736-1s0luk8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1220&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Treasurer Frydenberg’s address to parliament.</span>
<span class="attribution"><span class="source">MICK TSIKAS/AAP</span></span>
</figcaption>
</figure>
<p>Even if things go to plan, the harsh reality is that big parts of the economy are still likely to be <a href="https://grattan.edu.au/wp-content/uploads/2020/04/Shutdown-estimating-the-COVID-19-employment-shock-Grattan-Institute.pdf">doing less than they should</a> for some time yet. </p>
<p>Most of the world has not fared as well as Australia in limiting deaths and the spread of the virus, which means global economic activity and demand will be weak <a href="https://www.abc.net.au/news/2020-04-14/imf-forecasts-big-coronavirus-growth-hit/12147818">for some time</a>.</p>
<p>Businesses and consumers are likely to be cautious. Many will find themselves financially challenged because their <a href="https://www.ausbanking.org.au/covid-19/the-business-relief-package/">loan</a> and <a href="https://www.business.gov.au/Risk-management/Emergency-management/Coronavirus-information-and-support-for-business/Relief-for-commercial-tenancies">rent</a> obligations were deferred rather than removed during the crisis. </p>
<p>Australia’s population growth will be much slower because of the reduction in <a href="https://www.sbs.com.au/news/coronavirus-has-halted-immigration-to-australia-and-that-could-have-dire-consequences-for-its-economic-recovery">temporary migration</a>, hitting consumer-facing businesses and the broader economy.</p>
<p>Against this backdrop, the sudden withdrawal of massive government spending will leave an enormous hole in economy activity and the incomes of business and households.</p>
<p>The chart below shows that huge amounts of government support (more than 25% of gross domestic product) scheduled to vanish by the end of October.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/334881/original/file-20200514-167776-16s2kdw.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/334881/original/file-20200514-167776-16s2kdw.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/334881/original/file-20200514-167776-16s2kdw.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/334881/original/file-20200514-167776-16s2kdw.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/334881/original/file-20200514-167776-16s2kdw.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/334881/original/file-20200514-167776-16s2kdw.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/334881/original/file-20200514-167776-16s2kdw.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/334881/original/file-20200514-167776-16s2kdw.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
</figcaption>
</figure>
<p>It’s a recipe for a second downturn.</p>
<p>A much better approach would be to remove the measures slowly.</p>
<p><a href="https://theconversation.com/australias-130-billion-jobkeeper-payment-what-the-experts-think-135043">JobKeeper</a> could be wound back in line with the recovery of individual businesses. </p>
<p>Reassessing eligibility after most physical distancing restrictions have been removed, particularly if the health situation is well controlled, seems sensible.</p>
<h2>Support should end early for some, late for others</h2>
<p>If the revenues of some businesses rebound to close to pre-coronavirus levels, they could come off JobKeeper early, before the September deadline.</p>
<p>But if the revenues of others remain weak because their operations are still constrained by health restrictions, the government could consider extending their JobKeeper payments beyond September.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/that-estimate-of-6-6-million-australians-on-jobkeeper-it-tells-us-how-it-can-be-improved-137237">That estimate of 6.6 million Australians on JobKeeper, it tells us how it can be improved</a>
</strong>
</em>
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<hr>
<p>Targeting support to the firms that need it most in this way would be a better use of taxpayers’ money – and it would help stop the economy falling off a “cliff” in late October.</p>
<p>The <a href="https://theconversation.com/coronavirus-supplement-your-guide-to-the-australian-payments-that-will-go-to-the-extra-million-on-welfare-134358">JobSekeer supplement</a> could also be phased out more slowly than the government currently plans.</p>
<h2>JobSeeker should stay higher than it was</h2>
<p>The treasurer should settle on a <a href="https://grattan.edu.au/wp-content/uploads/2019/04/916-Commonwealth-Orange-Book-2019.pdf">new level of income support</a> – lower than JobSeeker with the supplement but probably $75 to $100 a week better than JobSeeker without the supplement – so that people on it are spared significant financial distress while searching for work.</p>
<p>It could also announce a range of measures to boost demand in the danger zones that will be created by supports coming off.</p>
<p>There are plenty of good options.</p>
<ul>
<li><p>one-off cash payments to households, which we know have <a href="https://www.alphabeta.com/illiontracking"> boosted spending</a></p></li>
<li><p>more spending on mental health services or programs to help disadvantaged students catch up on learning lost</p></li>
<li><p>infrastructure spending on shovel-ready projects with good returns to the community including <a href="https://blog.grattan.edu.au/2019/09/learning-from-past-mistakes-lessons-from-the-national-rental-affordability-scheme/">social housing</a>, roads and school maintenance</p></li>
</ul>
<p>Debt will need to be managed over the medium term, but it shouldn’t constrain the government from implementing the policies needed to drive recovery.</p>
<p>On Wednesday the Office of Financial Management unloaded $19 billion of new 10-year bonds in the biggest bond sale in Australian history, after receiving bids for more than <a href="https://www.afr.com/markets/debt-markets/we-got-this-covered-pm-buoyed-by-record-19b-bond-sale-20200513-p54sip">twice that many</a>.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/were-it-not-for-jobkeeper-unemployment-would-be-11-7-up-from-5-2-in-one-month-heres-how-the-numbers-pan-out-138268">Were it not for JobKeeper, unemployment would be 11.7%, up from 5.2% in one month. Here's how the numbers pan out</a>
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</em>
</p>
<hr>
<p>It will pay an interest rate of <a href="https://www.aofm.gov.au/program/forthcoming-transactions/pricing-dec-30">1.025%</a>, which is less than the rate of inflation.</p>
<p>Transitioning the economy from emergency settings to business as usual will not be easy, but there’s no imperative to do it suddenly.</p><img src="https://counter.theconversation.com/content/138527/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments, $4 million from BHP Billiton, and $1 million from NAB. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and contribute to funding Grattan Institute's activities. Grattan Institute also receives funding from corporates, foundations, and individuals to support its general activities as disclosed on its website.</span></em></p><p class="fine-print"><em><span>Nathan Blane does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Every one of Australia’s coronavirus support payments is due to end by the end of October. It’ll leave a gaping hole.Danielle Wood, Program Director, Budget Policy and Institutional Reform, Grattan InstituteNathan Blane, Analyst, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.