Joe Aston on: Liberty Day @ JobKeeper wasted $40 billion, not $27 billion, but who’s counting?

Officials chose not to alter jobkeeper rules out of fear the change may have ‘muted’ Australia’s recovery

 Nassim Khadem Treasury confirms it knew government was paying out billions in JobKeeper to firms that 'may not need support'

JobKeeper wasted $40 billion, not $27 billion, but who’s counting?

Joe AstonColumnist

Oct 12, 2021

The Commonwealth Treasury’s Insights into the first six months of JobKeeper was dumped on Monday, of course, being “Freedom Day” in the major media market of New South Wales. That’s public relations sorcery, right there. Fully three years into its bondage to Josh Frydenberg, the once-great department is now as alive to the forces of PR as it is to those of economics.

Team Frydenberg was correct to assume the nation’s economics journalists would either be in Sydney getting a haircut or in Canberra driven to distraction by the Instagram posts of their friends in Sydney getting a haircut.

Treasurer Josh Frydenberg has defended the JobKeeper scheme, saying it supported the economic recovery. Alex Ellinghausen

All of the major newspapers dutifully reported that between April and September 2020, $27 billion in JobKeeper was paid to recipients who didn’t experience a 30 per cent turnover decline.

If only $27 billion was all it was!

On page 40 of the report, Treasury explains that its analysis is based upon a $47.6 billion sample of the $70.3 billion paid in the first phase of JobKeeper. For reasons that are arguably flimsy and inarguably self-serving, Treasury’s analysis excluded all of the JobKeeper paid to not-for-profits like rich private schools and stadium churches and to subsidiaries of consolidated groups like Specsavers and Harvey Norman.

That means the $27 billion of JobKeeper paid to recipients who didn’t experience a 30 per cent turnover decline was actually 56.7 per cent of the $47.6 billion sample. Extrapolated to the full $70.3 billion of JobKeeper paid in the first phase, $39.9 billion of JobKeeper was paid to recipients who didn’t experience a 30 per cent turnover decline. Whether $40 billion or $27 billion, none of this excess is flattering. Why bother with the sophistry?

This is not Treasury’s finest hour. It even included a section entitled “JobKeeper is likely to have provided ongoing economic support by strengthening balance sheets”.

Risible claim

JobKeeper was never designed to strengthen balance sheets. That’s because JobKeeper was rolled out alongside a $34 billion cashflow boost program specifically designed to strengthen balance sheets. The cashflow boost program automatically paid every Australian small and medium enterprise between $20,000 and $100,000, tax-free. Now Treasury is claiming that JobKeeper (accidentally) had the same effect. Theirs is a corner of the Australian Public Service that shame and embarrassment forgot.

The report also reveals itself as the source for Frydenberg’s risible claim last month that in those businesses that never experienced a 30 per cent turnover decline, “more than 85,000 employees were stood down on zero hours” and that “without JobKeeper, these 85,000 jobs would have been lost”.

Treasury found that in those businesses, “around 5 per cent of employees were stood down. This equates to around 85,000 workers who … would likely have lost the connection to their employer without JobKeeper support.”

Treasury still provides zero evidence to support the patently ridiculous assertion that all of these jobs would’ve been lost without JobKeeper. None.

Even if we did accept Frydenberg’s absurd construction of history that 5 per cent of workers in these businesses (which were not in freefall) would’ve lost their jobs without JobKeeper, the question remains: why did he pay 100 per cent of the employees in these businesses $750 per week for six months if only 5 per cent of them were ever at risk? For every single worker Treasury contends needed the support, it paid a subsidy for 20 workers.

Contorted insights

Nowhere does this report explain the cost of “saving” these 85,000 jobs. Well, it was $469,130 per job over six months, or $938,260 annualised. That is $475 per hour, which is about what Treasury is usually paying Deloitte rent-a-quote Chris Richardson.

Yes, Frydenberg spent $18,043 per week, per job “saved”, despite only paying those employees $750 per week. That means the other $17,293 per week went straight down the gullets of employers. But this was not waste. Oh no, this was not waste.

On the upside, this means the 615,000 jobs purportedly saved with the $30 billion of JobKeeper paid to firms that actually needed it were bloody good value.

Treasury specifically addressed its advice to Frydenberg not to build into JobKeeper “a mechanism to claw back payments from businesses that performed better than expected” because “such a mechanism would likely have … muted the recovery”.

So why, then, did Treasury neglect to justify its advice not to retest the turnover of JobKeeper recipients after three months instead of six, as New Zealand did? Doing so would’ve saved the Australian government $20 billion, enough to pay for two nuclear submarines, or 2500 car parks in the seat of Kooyong.

Nowhere in its contorted insights did Treasury deign to ask itself what value for money it achieved for taxpayers or to identify the mistakes it made. The Fiscal Group must’ve been too busy tabulating JobKeeper spending by marginal electorate for Liberal Party campaign material.

Such is the abysmal product of letting such a deeply diminished public institution mark its own homework. With Frydenberg as its teacher, we can scarcely be surprised.

Joe Aston has helmed The Australian Financial Review's Rear Window column since 2012. He is based in Sydney. Connect with Joe on Facebook and Twitter.Email Joe at joe.aston@afr.com

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