Labor urges Coalition to reverse plan to cut jobkeeper as economy worsens

Labor has called on the Morrison government to reverse its plan to cut the jobkeeper wage subsidy in September, because economic conditions have deteriorated since the announcement.

Ahead of the resumption of federal parliament next week, where the economy and aged care will be a major focus, the shadow treasurer, Jim Chalmers, told Guardian Australia the government needed to rethink its plan to taper the jobkeeper payment in the light of the Victorian outbreak.

Chalmers said the government needed to tailor income support to the current economic conditions “and we know the jobs crisis has been getting worse, not better”.

“The extension of jobkeeper was welcome, but it makes sense for the tapering to be reconsidered now, given it was announced just as the situation in Victoria was deteriorating,” he said.

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According to a spokesman for the treasurer, Josh Frydenberg, the government is able to proceed with tapering the payment without having to secure parliamentary approval until the end of this year. Any changes in 2021 would have to come back to the parliament for approval.

But Chalmers said the government needed to consider the impact of reducing the wages subsidy next month given the prolonged second wave of Covid-19 infections in Victoria and the risks of an outbreak in New South Wales.

“Winding back jobkeeper will remove a fair bit of support from the economy, which is more alarming in the absence of any comprehensive jobs plan,” he said.

“If they are winding back jobkeeper, and the economy is not recovering as fast as we like, then what is going to fill the hole? Economists and peak groups we speak to are increasingly worried about this new September cliff.”

“The Reserve Bank and others are already warning that withdrawing support too soon risks compromising recovery, and we can’t afford a generation of lost and discarded workers left out and left behind.”

The latest labour force data from the Australian Bureau of Statistics says more than a million Australians are now out of work.

The prime minister, Scott Morrison, and Frydenberg in July announced an extension of the income support rolled out to support Australians during the pandemic, but it foreshadowed cuts to both the jobkeeper and jobseeker payments on the rationale that the government could not keep “burning cash”.

As well as lowering the rate of the jobkeeper wage subsidy and the $550 coronavirus supplement in jobseeker after September, the government proposed to tighten the eligibility requirements for both payments – including retesting businesses in October.

But three weeks later, the government changed tack, overhauling the new eligibility requirements for the jobkeeper wage subsidy in the light of the deterioration in Victoria.

The government’s adjustments in early August mean that businesses and not-for-profits will only have to show a fall in turnover in the September quarter compared with a comparable period in 2019, rather than having to show declines in the June and September quarters to requalify for the subsidy after 28 September.

After 4 January 2021, businesses and not-for-profits will have to show a fall in the December quarter compared to a comparable period the year before instead of having to demonstrate a fall in turnover in the June, September and December quarters to access the payment.

The comments from Chalmers follow a declaration at the weekend by the former Labor leader, now shadow minister for government services, Bill Shorten, that the government should not cut either jobkeeper or jobseeker in September.

Shorten told the ABC Labor would “arrive at its position” but “I live in Victoria – it’s pretty bloody obvious that we should be extending jobseeker and jobkeeper into the next year”.

“As a Victorian, I see the hardship,” he said. “Jobkeeper has, on balance, done more good than harm. Let’s just get on with it.”

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