Australia has slashed the estimated cost of its flagship Covid-19 jobkeeper scheme by A$60bn due to a “reporting error” in an embarrassing but hugely positive development for the public finances.
Josh Frydenberg, Australia’s treasurer, said on Friday the treasury now expected businesses to access government payments on behalf of 3.5m employees, rather than the 6.5m employees it had been forecasting up until this week. The total cost of the programme, which covers the wages of furloughed employees, is now estimated at A$70bn, rather than A$130bn.
The miscalculation in the number of employees covered by the scheme relates in part to a reporting error by about 1,000 companies, which filled in an application form incorrectly. Australian authorities’ success in suppressing the spread of the virus has also enabled state government to relax social distancing restrictions faster than initially anticipated, reducing the number of workers reliant on jobkeeper, said the government.
“It is welcome news that the impact on the public purse from the programme will not be as great as initially estimated,” said Mr Frydenberg, who added that the reporting error held no consequence for any jobkeeper payments already made.
Australia is facing its first recession in almost 30 years because of Covid-19, which the government forecast would shrink the economy by 10 per cent in the June quarter and double the rate of unemployment to 10 per cent.
Opposition parties seized on the miscalculation by the government, which has resisted calls to allow casual employees and those staff working for companies owned by state-owned enterprises, to access jobkeeper.
Labor described the blunder by the treasury as “another day, another shambles” from the government and called on the Liberal-National coalition to immediately expand the jobkeeper programme.
“For weeks they’ve been telling casuals and others that the programme was full when in reality they were 3m workers short,” said Jim Chalmers, Labor’s treasury spokesman.
Dnata, the catering and ground handling company owned by Emirates Group, has threatened to pull out of Australia following a government decision to refuse its 4,500 staff access to Jobkeeper because the group’s ultimate owner is the state investment arm of Dubai.
Saul Eslake, an economist and fellow at Tasmania university, said the reporting error was a bit embarrassing for the Treasury. However, he said it would provide Canberra with more financial firepower to support the economy when the jobkeeper scheme was due to expire at the end of September.
“The two big risks to Australia’s recovery are renewed Covid-19 outbreaks that force the reimposition of social distancing restrictions and the fiscal cliff that occurs when all the support programmes come to an end in late September,” said Mr Eslake.
“This discovery gives the government some room to taper the end of these support programmes and possibly extend jobkeeper for some of the worst impacted industries, including tourism.”
The reporting error was discovered following a review by the Australian Taxation Office, which found about 1,000 businesses made significant errors on their enrolment forms. Instead of reporting the number of employees they expected to be eligible, they reported the amount of assistance they expected to receive. For example, more than 500 companies with a single eligible employee had erroneously reported a figure of 1,500 — which was the dollar amount they expected to receive each fortnight for that employee rather than the number of eligible employees, said the ATO and Treasury in a joint statement.