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‘Premature withdrawal of JobKeeper could be damaging’, RBA governor warns

Maja Garaca Djurdjevic
Maja Garaca Djurdjevic
29 May 2020 1 minute readShare
Reserve Bank government Phil Lowe

Reserve Bank governor Philip Lowe had opined that the government’s JobKeeper program may need to be extended beyond its September cut-off date, if economic recovery is not up to speed.

Speaking before the Senate committee tasked with overseeing the government’s response to COVID-19, Dr Lowe said that September will be a “critical point” for the economy, warning that a “premature” withdrawal of a number of fiscal stimulus measures could be damaging.

Dr Lowe told the committee that if the current “trough in economic activity” continues, there should be a debate about how the JobKeeper program transitions into something else, whether it’s extended for specific industries or somehow tapered.  

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“It will be important to review the parameters of that scheme,” Dr Lowe said.

“It may be in six months’ time we bounce back well and the economy is doing reasonably well, and these schemes, which were temporary in nature, can be withdrawn without problems.

 

“But if the economy is not recovered reasonably well by then, as part of that review, we should be looking at, perhaps, the extension of that scheme or the modification in some way.

“But I think at this point, I think it’s too hard to say because the outlook remains very uncertain, but its going to be a very critical point in the economy.”

Debate around the extension of JobKeeper has been brewing for some time, and the Treasury’s recent revelation that the cost of the scheme has been mistakenly inflated by $60 billion has added fuel to the fire, with many arguing that the extra funds should be used to extend the scheme. 

However, the Treasurer has since said that there will be no “wholesale changes” to the program, suggesting that the significantly lower take-up of JobKeeper is not “an invitation to go and spend more money”.

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Mr Frydenbergy said: “Every dollar that we’re spending is borrowed money. It means that our children will be paying it back. It will take years to pay back the accumulated debt from the coronavirus period, there’s no doubt about that.”

Questioned also about the apparent lower take-up of the program, with revised figures showing 3.5 million workers will benefit and not the previously believed 6.5 million, Dr Lowe gave it a positive spin.

He said: “The economy is doing a bit better than was earlier feared. People were talking about a six-month hibernation. But businesses are opening up now.

“It’s really good news that that amount of money doesn’t have to be spent.”

He underlined his support for the Treasurer’s stance, adding that the money should not be spent now, but stressed again that “the issue will be in three to four months’ time”.

‘Premature withdrawal of JobKeeper could be damaging’, RBA governor warns
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Maja Garaca Djurdjevic
Maja Garaca Djurdjevic

Maja Garaca Djurdjevic is the editor of My Business. 

Maja has a decade-long career in journalism across finance, business and politics. Now a well-versed reporter in the SME and accounting arena, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies and enabling citizens to influence decision-making.

You can email Maja on [email protected] 

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