By the numbers: Extend JobKeeper, dial back on infrastructure to keep post-COVID economy afloat
As FY20 draws to a close with global COVID-19 cases continuing to rise sharply, the focus on additional government stimulus may intensify.
How government’s react could have a material effect on the markets outlook, given the central nature government spending announcements played in initiating the market rebound in the last week of March.
On that front, policy think tank the Grattan Institute issued its own set of recommendations this morning, adding to calls that the Morrison government’s primary stimulus measure — the six-month JobKeeper program — should be extended beyond September 27.
Grattan recommended that the government initiate a targeted three-month extension, focused on companies that can demonstrate evidence of ongoing disruptions to their business as part of a September re-test.
It forms part of an additional $30bn spending package recommended by the institute to help support the economy out of the worst of the crisis. Here’s a breakdown of the numbers:
The analysts estimate that two thirds of Australian businesses currently receiving JobKeeper support will no longer be eligible, while the other third will require extended funding.
They also suggested tweaks to the program, with eligibility extended to temporary migrants, casual workers and university workers.
Those additional costs would be offset by introducing a “part-time” JobKeeper payment, “rather than the present flat payment to everyone regardless of their previous or current work hours”.
The institute also offered its view on medium-term economic policy, where it advocated for keeping a “cool head”.
In particular, the analysts highlighted Prime Minister Scott Morrison’s recent prediction that overseas migration will fall by 30 per cent this year, and 85 per cent in 2021.
However, “the existing infrastructure pipeline is predicated on the population growth we used to have”.
While some state government ministers have pushed for increased infrastructure spending to help rebound from the crisis, Grattan advocated for a state-by-state review “of all major projects to see whether they are still a priority, or indeed whether they are needed at all”.
Along with population changes, Grattan argued that COVID-19 could result in permanent shifts in work and travel patterns.
“At this time of great uncertainty, it makes little sense to forge ahead with projects conceived during a time of rapid population growth, and even less to commit to new ones,” the institute said.
Instead, governments should take the opportunity to fast-track smaller projects, such as road improvements and train station upgrades, and “ignore calls for stimulus spending for infrastructure that is inconsistent with a low-emissions future”.