Tuesday’s announcement comes ahead of Thursday’s economic update, which is expected to show the true depth of Australia’s recession. Data from the ATO has revealed that, to date, more than 960,000 organisations have been processed for JobKeeper payments covering around 3.5 million individuals.
According to a summary of the review’s findings, issued by the Treasury, the JobKeeper review has made numerous valuable discoveries, but one of the most poignant is the scheme’s tendency to create “adverse incentives”, which is why JobKeeper 2.0 will be a scaled-down, two-tiered version of its predecessor.
Aside from tightening eligibility, the post-September JobKeeper will reflect hours worked prior to the pandemic, offering a lower subsidy rate to those that were earning less — unlike the current scheme which has meant a quarter of participants receiving the payment have had an income rise compared to February.
“Several industry stakeholders advised the review team of instances where part-time workers have been reluctant to do additional hours of work more commensurate with the JobKeeper payment, as well as instances where stood-down workers have been reluctant to take on any work hours as businesses have begun to reopen in recent weeks,” the review reads.
According to the Prime Minister, the new JobKeeper payment will be reduced to $1,200 per fortnight from October, while those working under 20 hours pre-COVID will receive $750 instead of the $1,500 flat rate. As of the start of January until the end of March 2021, the payment will be lowered further to $1,000 and $650, respectively.
“We made the conscious decision to have a flat-rate payment because we understood at that time that people were losing second and third jobs,” PM Morrison said of the original JobKeeper amount.
“Ensuring we had one flat payment across the entire labour force ensured that we were protecting our social security system and you will also remember the great strains that that system was under early during the crisis.”
He judged that given the changed situation, a two-tiered system is now possible.
Further changes will be made to eligibility, tweaking the “once in, always in” rule through the introduction of subsequent eligibility tests.
Under the current scheme, businesses with turnover under $1 billion have been eligible for the payment if they experienced an estimated drop in turnover of at least 30 per cent at the time they applied; for those with turnover above this limit, the drop was 50 per cent.
However, according to the review’s findings, the fact that that the turnover test has been based on projected changes may have been a disservice to the scheme.
As such, the new turnover test will be based on “measured or actual turnover change rather than projected change when businesses first applied”.
Speaking on Tuesday, the Prime Minister explained that there will be two turnover tests under JobKeeper 2.0.
“The changes that we’re making, the first of those is to apply the JobKeeper test for the 30 per cent turnover reduction across the past two quarters and into the next quarter for the continuing eligibility out to the end of March of next year,” Mr Morrison said.
“There’ll be the next quarter after September, and then there’ll be the March quarter. In both cases, businesses will have the test re-applied in relation to their turnover and will be looking at their performance over the first six-month period of the program, and that will provide, where it’s needed, the gateway into the next phase of the program.”
While the JobKeeper review did find that the scheme was pretty well targeted, going mostly to businesses that experienced an average decline in turnover in April of 37 per cent against the same month a year previous, there was also evidence of it stunting labour mobility and keeping non-viable businesses alive.
“JobKeeper has a number of features that create adverse incentives which may become more pronounced over time as the economy recovers,” the Treasury said.
“It distorts wage relativities between lower and higher-paid jobs, it dampens incentives to work, it hampers labour mobility and the reallocation of workers to more productive roles, and it keeps businesses afloat that would not be viable without ongoing support.”
Prime Minister Scott Morrison has confirmed that the changes to JobKeeper would not be implemented immediately, with businesses given time to adjust to the new announcements.