The biggest policy miscalculation in Australian political history has reignited calls for the Morrison government to extend the $130 billion JobKeeper wage subsidy to casual and foreign workers while damaging the internal standing of Treasurer Josh Frydenberg.
Federal Treasury revealed on Friday that a "significant error" in the JobKeeper application form meant that instead of supporting 6.5 million workers and costing $130 billion over six months, it was now expected to support 3.5 million people and cost the budget $70 billion.
A Tax Office review of the enrolment forms used by businesses to apply for the scheme found about 1000 firms had made "significant errors" when estimating the number of staff who would use the program.
Internally, some government MPs have started arguing the $60 billion shortfall should be saved but there is pressure from others for the program to be widened to groups such as casual workers who have not been attached to a single employer for at least 12 months.
There was also strong reaction among some Coalition backbenchers about Mr Frydenberg's handling of the issue, particularly the sheer size of the error.
The most common mistake was where firms, asked to report the number of employees they expected to go on to JobKeeper, actually reported the amount of money they expected to receive. More than 500 firms with just one eligible worker instead reported "1500", which is the JobKeeper payment per person per fortnight.
The mistake was discovered as the Tax Office and Treasury found a major difference between their initial forecast and the amount of cash flowing to businesses to support their staff.
Investigations into the problem started at the start of this week. As late as Thursday, Treasury secretary Steven Kennedy told a Senate inquiry that more than 6 million people were being supported by JobKeeper. Mr Frydenberg was formally briefed on Friday.
But when Treasury first revealed its estimate of how many people would be supported by JobKeeper, private sector economists raised doubts with The Sydney Morning Herald and The Age that it would extend to 6.5 million workers.
There have also been complaints from small businesses that requirements to use JobKeeper are too onerous, particularly the pre-payment of workers' wages before being reimbursed by the tax office.
Prime Minister Scott Morrison announced on March 30 the scheme was initially forecast to support 6 million workers and cost $130 billion. The Tax Office said expressions of interest filled out by firms after that date confirmed the forecast.
Mr Frydenberg would not take responsibility for the issue, describing it as an unintentional reporting error that also showed the economy was doing better than expected.
He said the saving was "good news" for taxpayers, pushing back for demands to extend JobKeeper to those initially excluded from the scheme.
"We're not making wholesale changes to the JobKeeper program. We'll have a review, as we've always stated, midway through the program, and we'll wait for the results of that review," he said.
Labour force figures last week revealed almost 600,000 jobs disappeared in April while hundreds of thousands more Australians have left the jobs market altogether.
The big shortfall also casts doubt on official forecasts for the economy. All have been predicated on $130 billion being pumped into the bank accounts of workers over a six month period.
The Treasury said it still believed unemployment would still reach 10 per cent by the middle of the year.
Opposition Leader Anthony Albanese said the mistake dwarfed any other costing issue in Australian history, adding the mistakes should have been picked up early in the process.
"This is a mistake you could have seen from space, and this is a government that couldn't run a bath, let alone be good economic managers," he said.
Universities Australia said the government should look to extend JobKeeper to the nation's tertiary institutions.
Labor Leader Anthony Albanese says the size of the problem with JobKeeper was so large "it could be seen from space".Credit:Dan Himbrechts
“As we have said in recent weeks, without greater support universities face the loss of 21,000 jobs in the next six months and a significant reduction in the essential research undertaken on our campuses," chief executive officer Catriona Jackson said.
The Australian Industry Group said the government should address anomalies in JobKeeper, including extending its to low-margin firms that may not have suffered a 30 per cent drop in turnover but are under greater financial stress because of the pandemic.
The Migrant Workers Centre said there was now no excuse to "condemn over a million migrant workers to starve when the Morrison Government has $60 billion in its back pocket".
JobKeeper and the JobSeeker coronavirus supplement are both due to end in September.
Australian Greens' spokeswoman Rachel Siewert said given the shortfall in JobKeeper, there was no excuse for the government to cut JobSeeker payments.
"Further, the Government can top up the disability support pension and carer payments so that disabled people and carers can meet the additional costs they are facing because of the pandemic," she said.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.
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2020-05-22 07:55:32Z
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