The UBS economics team expects to upgrade its forecasts for GDP and employment after the Morrison government flagged further stimulus measures yesterday.

Ahead of its economic update tomorrow, the government announced a range of extensions — most notably to its JobKeeper payments program.

With markets growing wary of the September cutoff date for the initial six-month JobKeeper phase, the program was extended for another six months to March 2021.


Economic ‘cliff’ avoided for now

That was a longer extension than UBS had expected based on previous government comments, albeit with reduced payment amounts.

The bank’s economics team led by George Tharenou said it now expected to upgrade its growth forecasts following tomorrow”s official announcement.

UBS said that along with JobSeeker, the extension of the programs would be worth a combined $20bn to the economy in the December quarter.

That equates to more than 1 per cent of annual GDP growth, except the activity will be concentrated in Q4.

As a result, “this reduces the downside risk for growth and employment in Q4”, the analysts said.

“We have been particularly concerned that the end of JobKeeper could have driven a second wave of job losses,” UBS said, however, “Q4 GDP and employment are
still likely to be better than we feared, with upside risk to our current forecasts”.

The changes to JobKeeper will see the current flat rate of $1,500 per fortnight (which covers 3.5 million people) replaced by a $1,200 payment for those that work more than 20 hours per week, with a $750 payment for part-time workers. In the March quarter next year, those rates will reduce to $1,000 and $650, respectively.

UBS said the changes were designed to limit the number of people who were receiving a higher wage from the JobKeeper subsidy than they were being paid previously.

Estimates indicate that around a quarter of the 3.5 million JobKeeper recipients are now receiving higher wages, although the “actual incidence is less given many of these workers are casual and/or part-time and work multiple jobs”, UBS said.