“If the public policy risk is that otherwise viable businesses (and the jobs they support) are being pushed into closing by COVID-related events, then there’s a good reason to provide temporary support to tide families and businesses through the tough spot – indeed, that’s a reasonable description of JobKeeper,” the report says.
“Then again, the longer the crisis lasts (and it will clearly last some time longer yet for those whose livelihoods are connected to international borders), then the less the chance that businesses (and the jobs they support) will survive.”
Deloitte says the government should aim such policies at addressing problems rather than symptoms.
“For example, a lack of air travel is a symptom, so a program aimed at subsidising airfares on specific routes is a pretty blunt instrument to protect specific jobs,” the report says.
A better use of taxpayers’ money would be rolling out mini-versions of JobKeeper, as wage subsidies are normally a more efficient way of providing support to businesses that most need assistance.
JobSeeker boost unfair
Deloitte also added that while the Morrison government had presided over the first above-inflation increase in the nation’s unemployment benefit since 1994, “even with the additional $3.57 a day, the rate of JobSeeker still fails the fairness test – badly”.
“Had JobSeeker kept pace with wage growth over the last quarter of a century, then it would be $90 a week higher than the new rate,” the report says.
Deloitte says the direct cost of the $25-a-week increase would be $8 billion over the forward estimates, with much of that to be recovered through higher taxation and stronger economic growth as recipients go out and spend the extra cash on essentials.
“Previous work by Deloitte Access Economics for the Australian Council of Social Services shows that for every $3 spent on unemployment benefits, the eventual total net cost to the federal budget is only $1,” the report says.
“That’s because higher incomes for the unemployed are spent – which isn’t a surprise given that, as a group, they are the poorest Australians.”
When Treasurer Josh Frydenberg hands down the budget on May 11, Deloitte are expecting the following:
- The better-than-expected recovery to have boosted the budget bottom line by $17 billion in 2020-21 and $3 billion in 2021-22, when compared to forecasts made in December
- National income in 2020-21 to be $31 billion or 1.6 per cent higher than Treasury forecast in December
- The rapid recovery in the jobs market to have boosted the government’s personal income tax take by $5 billion this financial year and $14 billion next
- An extra $9 billion in profit taxes both this financial year and next, thanks to high iron ore prices, healthy sharemarkets and recovering gas prices
- Confident consumers to have splashed so much cash that revenues from spending taxes (including GST and excises and customs duties) will be up $6 billion this financial year and $5 billion next
- Overall government revenues in 2020-21 to be $21 billion higher than forecast in December
- The government to report underlying cash deficits of $167 billion this financial year and $87 billion next financial year.