Flat White

The JobKeeper tap can’t keep flowing

17 June 2020

11:04 AM

17 June 2020

11:04 AM

The easier it is to announce free money during a crisis, the harder it is to take it away when the crisis is over.

Some have already started warning about the risks involved in stopping the JobKeeker $1,500 fortnightly payment, which expires in late-September.

We should be deeply sceptical of those calling for an extension of JobKeeper now, based on speculation about economic conditions in October. It would be a mistake to lock in hundreds of billions of dollars of spending before we see how the economy responds to the lifting of restrictions.


And while there is some merit to the claim there are flaws in the JobKeeper model, it is arguably better to simply allow it to run until its current end date, rather than try to perfect it, at the risk it stays around longer.

To understand the main problems with JobKeeper, it is important to understand what it’s actually doing. It may be marketed as a subsidy for employees, but its purpose and effect is to provide a cashflow subsidy to business (primarily small businesses) and to mask the massive increase in unemployment caused by shutting down the economy.

It is important to dispel the myth that the main impediment to businesses maintaining their workforce is the physical restrictions of the lockdown —and that once it ends, workers will return en masse to their old jobs.

It is far more likely that the coming economic downturn (in part caused by the lockdown) will be protracted, and unemployment will remain high for some time. Those arguing JobKeeper must be extended or some recipients will lose their jobs, are really just making it clear that for many there is no job to go back to.

JobKeeper simply cannot prevent, in whole or in large part, the economic reckoning of a global pandemic.

Simon Cowan is Research Director at the Centre for Independent Studies.

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