In media circles we call it “taking out the trash”.
It’s the big news you receive late on a Friday afternoon from the government or a huge public company, and it’s almost always related to mass job losses or a huge stuff-up of some kind.
Late last Friday the government announced its Treasury Department had misjudged or mis-counted the number of businesses that would be receiving the JobKeeper payment.
In a statement, Treasury and the ATO said the mistake came from businesses reporting how much financial assistance they expected to receive, instead of how many employees they thought would be eligible.
Over the weekend though it became clear the miscalculations may have begun many weeks ago, when Treasury was trying to estimate how many businesses would come forward to receive the payments.
We still don’t really know exactly how or why Treasury’s forecasting models were so wrong… but boy were they wrong.
Either way, it turns out the number of people on JobKeeper has now been revised down by 3 million, from 6.5 million to just 3.5 million.
Significantly though, this now frees up roughly $60 billion.
The big question is whether this can now go to extending the JobKeeper payment through until next year?
Heading for the cliff
The numbers are quite staggering.
Tens of thousands of businesses are suffering from social distancing measures. Many have laid off staff or are keeping them idle under the JobKeeper arrangement.
It means, potentially, millions of workers, not to mention casuals, are facing enormous uncertainty in October, when the JobKeeper payments end.
This also happens to coincide with the ending of the mortgage ‘holidays’ borrowers have been clinging onto, and the wash-up from the end of the moratorium on rental evictions.
So let’s be clear about all this – anyone with bills is freaking out about later in the year – especially if they don’t have a job or their employment is insecure.
At this point, mortgages will need to be paid, rents will need to be coughed up and without any government support, what on earth are folks going to do?
Dipping into your super remains an option but, frankly, this finance commentator thinks that’s an absolute 11th hour measure.
Please, sir, I want some more
So will the government then extend the JobKeeper payment? At this point, no.
The Treasurer says it was never the government’s money to spend in the first place.
Speaking on the ABC’s Afternoon Briefing, Josh Frydenberg said the Government would not be reallocating the rest of the forecast funding for JobKeeper to other areas, saying it was all "borrowed money" and the error meant less would have to be repaid by future generations.
He's right of course, it’s all borrowed money. The government never had the money to begin with.
That said, when the government went cap-in-hand to the bond market to raise the cash in the first place, it was extremely successful.
And you could argue that the $200 plus billion originally slated was deemed to be manageable over the longer-term.
So it’s not unreasonable to ask whether the extra $60 billion that’s now available could be directed towards universities that have missed out on the payments, or casuals that have gone without, or simply extend the program.
The money is being, and was, successfully raised, and it can be legitimately used.
It doesn’t look like any of that will happen though.
Government’s message to job seekers remains unchanged
The Coalition’s image rests on effectively managing the economy.
Bizarrely, this stuff up actually helps with that.
Imagine if it had grossly underestimated how much money needed to be allocated towards the program. Not only would there be an embarrassing mistake, but the government’s reputation would be in tatters.
The Coalition has always maintained the ‘best form or welfare is to have a job’.
I suspect between now and the end of the year, the federal and various state governments will do all they can to gradually open up the economy to ensure more businesses can open their doors and therefore hire more people.
This is an organic way to get more workers off JobKeeper and into work.
It comes with huge health risks, but those risks seem to be manageable now.
Certainly the NSW government is pressing ahead, allowing 50 patrons into bars and cafes by 1 June, in addition to allowing travel to local tourist hotspots.
Up to the economy now
So as restrictions ease, it’s desperately hoped the economy will improve and the jobless rate will come down.
If the economy improves, and workers are hired, the government’s money management record will be maintained.
If COVID-19 comes roaring back, we’ll go into lockdown again and all bets will be off.
Either way, the government will remain on message.
Despite tens of billions becoming available ‘overnight’, you can see why, politically, the government’s position remains unchanged.
It’s just clever politics, combined with brutal logic.
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