The key to the success of the $130 billion wage subsidy is retrospective paid work


Peter Martin, Crawford School of Public Policy, Australian National University

The secret sauce in the government’s A$130 billion JobKeeper payment is that it will be retrospective, in the best possible way.

It’ll not only go to employers who have suffered losses and had employees on their books tonight, March 30, but to employers who have suffered losses and had workers on their books as far back as March 1.

This means that employers who have sacked (“let go”) of workers at any time in the past month can travel back in time, pay them as if they hadn’t been sacked, and nab the A$1,500 per employee per fortnight payment.

As the official fact sheet puts it, “the JobKeeper Payment will support employers to maintain their connection to their employees”.

This retrospective connection will add new meaning to the term “revision” when the March unemployment numbers are released.

Not only will the March numbers be liable to being revised a month later as is normal in the light of extra information, but many Australians who were unemployed in March will retrospectively turn out not to have been unemployed.

They will have been retrospectively in paid work.




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(And if they have applied for the Centrelink payment of Newstart plus $550 per fortnight, they’ll have to un-apply to avoid what the prime minister referred to as “double counting” rather than the more loaded “double dipping”.)

It gets better. If you have been part-time, or for some other reason on less than $1,500 per fortnight, “your employer must pay you, at a minimum, $1,500 per fortnight, before tax”.

This means you’ll get a pay rise, for the six months the scheme lasts.


The Conversation, CC BY-ND

If you’ve been let go and then retrospectively un-sacked, you are also guaranteed to get at least $1,500 per fortnight, which in that case might be less than you were being paid, but will be more than the $1,115 you would have got on Newstart (which has been renamed JobSeeker Payment).

If you remain employed, and are on more than $1,500 per fortnight, the employer will have to pay you your full regular wage. Employers won’t be able to cut it to $1,500 per fortnight.




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To get it, most employers will have to have suffered a 30% decline in their turnover relative to a comparable period a year ago. Big employers (turnover of $1 billion or more) will have to have suffered a 50% decline. Big banks won’t be eligible.

Self-employed Australians will also be eligible where they have suffered or
expect to suffer a 30% decline in turnover. Among these will be musicians and performers out of work because large gatherings have been cancelled.

Half the Australian workforce

The payment isn’t perfect. It will only be paid in respect of wages from March 30, and the money won’t be handed over until the start of May – the Tax Office systems can’t work any faster – but it will provide more support than almost anyone expected.

It’s scope is apparent when you consider the size of Australia’s workforce.

Before the coronavirus hit in February, 13 million of Australia’s 25 million residents were in jobs. This payment will go to six million of them.




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Without putting too fine a point on it, for the next six months, the government will be the paymaster to almost half the Australian workforce.

Announcing the payment, Prime Minister Scott Morrison said unprecedented times called for unprecedented action. He said the payment was more generous than New Zealand’s, broader than Britain’s, and more comprehensive than Canada’s, claims about which there is dispute.

But for Australia, it is completely without precedent.The Conversation

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

$1500 a fortnight JobKeeper wage subsidy in massive $130 billion program


Michelle Grattan, University of Canberra

The Morrison government will provide a flat $1,500 a fortnight JobKeeper payment per employee for businesses to retain or rehire nearly six million workers, in a massive $130 billion six-month wage subsidy scheme to limit the economic devastation caused by the coronavirus.

Describing the initiative as “unprecedented action” for “unprecedented times”, Prime Minister Scott Morrison said this was a “uniquely Australian” solution to keep enterprises and their workers connected through to “the other side” of the crisis.

He said no Australian government had never made such a decision “and I hope and pray they never have to again.”


The Conversation, CC BY-ND

The payment, made through the tax system, applies for workers of large, medium and small enterprises, and not-for-profits. It will start flowing from May 1, but will be backdated to March 30.

Workers who have already lost their jobs will be eligible if they were on the enterprise’s books on March 1, and are re-engaged.

It will be a flat rate for all those eligible, who include full-time, part-time, and casual workers (provided they have been with their employer for a year). Self-employed individuals will also be eligible.

The payment is about 70% of the national median wage. For workers in the accommodation, hospitality and retail sectors – sectors hardest hit by the crisis – it will equate to a full median replacement wage.

To be eligible, enterprises with an annual turnover of less than $1 billion must have lost at least 30% of their revenue after March 1 over a minimum of a month-long period.

For businesses with turnovers of more than $1 billion the reduction in revenue has to be at least 50%.

Where workers have already lost their jobs, they can be rehired by their employer, provided they were attached to the enterprise on March 1.

This will mean some people who have applied for a Centrelink payment will reconnect with their firm and will move to the JobKeeper payment.

Morrison and Treasurer Josh Frydenberg announced the scheme at 4 pm and almost 8000 businesses had registered by 5 pm.

The $1,500 a fortnight will be paid whether the employee is working (in the case of an enterprise still operating) or not (if the business is not trading).

Businesses that keep operating will have to pay each employee at least the $1,500, but there will be discretion about what’s paid above that.

The $130 billion JobKeeper scheme is the third tranche of emergency assistance the government has unveiled since March 12.

“This is about keeping the connection between the employer and the employee and keeping people in their jobs even though the business they work for may go into hibernation and close down for six months,” Morrison said.

“We will give millions of eligible businesses and their workers a lifeline to not only get through this crisis, but bounce back together on the other side,” he said.

The latest initiative brings the total support made available in the crisis to $320 billion, including $90 billion assistance from the Reserve Bank. The total amounts to the equivalent of 16.4% of GDP.

Frydenberg said Australia was “about the go through one of the toughest times in its history”. The government had doubled the welfare safety net and now had gone even further, he said.

Business welcomed the scheme. The Australian Chamber of Commerce and Industry said it was a “game changer”.

The Business Council of Australia said the government had “made the right choice to work through the systems we already have in place to get assistance where it is needed as soon as possible.”

But ACTU secretary, Sally McManus, expressed concern that $1500 a fornight might not be enough. She said the full median wage of $1,375 a week “is what is needed”.

The government is also temporarily liberalising access to income support. The JobSeeker payment has been subject to a partner income test of about $48,000. This is being temporarily relaxed so an eligible person can receive the JobSeeker payment and the associated new Coronavirus supplement of $550 a fortnight provided their partner earns less than $79,762 a year

In other coronavirus developments on Monday, Victoria announced it had moved to “stage 3” of the response to the crisis, with the two-person restriction on gatherings to become legally enforceable.

The two-person rule was announced by Morrison on Sunday but it was left up to the states to decide whether to make it enforceable.

Victorian Premier Daniel Andrews said: “If you are having friends over for dinner or friends over for drinks that are not members of your household, then you are breaking the law”.

“You face an on-the-spot fine of more than $1,600”.

NSW is also announced it will enforce the rule.

Queensland, which has closed its border, is toughening border controls.

Federal Deputy Chief Medical Officer Paul Kelly flagged modelling the government is using in its response will be made available later this week. Morrison has faced pressure for the modelling’s release.

Kelly told a news conference he had asked his staff “to organise a meeting later this week where the modelling and the epidemiology and the public health response will be unlocked, and people will be able to ask questions about that.

“I think we have been quite open with components of the modelling, but I respect that there is a large number of ways that modelling can be done, and so we need to be more transparent, and we will be.”The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Government’s new $66 billion package will take coronavirus economic life support to $189 billion


Michelle Grattan, University of Canberra

Small and medium-sized businesses will get up to $100,000 in cash payments in the government’s second stage of emergency assistance, worth a huge $66 billion, to cushion businesses and individuals as the coronavirus cuts a swathe through Australia’s economy.

The package, to be announced Sunday, will bring to a massive $189 billion the official injection of cash and credit to prop up businesses, protect jobs where possible and assist those whose jobs can’t be saved as well as welfare recipients and low income earners.

It is equivalent to a whopping 9.7% of GDP. This compares with Canada’s stimulus of 4.5% of GDP; Hong Kong’s 4.5%, and South Korea’s 4%.

The $189 billion includes the government’s initial $17.6 billion stimulus package – dwarfed by its successor – and $105 billion in credit measures from the Reserve Bank and the government announced last Thursday.




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With the Australian COVID-19 tally of cases above 1000, the government is already flagging there will need to be a third package as the economy spirals down in the wake of the sweeping measures to try to contain the virus’s spread. The restrictions are expected to become tougher in coming days and weeks.

The second stage package includes, apart from the wage subsidy, a loans guarantee to help keep enterprises operating. It also contains extensive income support and other measures, details of which are not yet available.

The tax free cash payment of up to $100,000 will be available to businesses with turnovers below $50 million and also to eligible not-for-profit charities.

It will cost $25.2 billion. In its first package, the government announced a cash payment equal to 50% of tax withheld, up to $25,000 in payments and with a minimum of $2000. That was worth $6.7 billion, making the combined total of the two $31.9 billion.

Under the latest measure, a business will get a payment equal to 100% of the tax it withholds from its workers’ wages, up to a maximum of $100,000.

Eligible businesses will be able to get a minimum $20,000 even if they are not required to withhold tax.

The government estimates about 690,000 businesses, employing about 7.8 million people, will he helped, as well as some 30,000 not-for-profit enterprises.

The measure is front-end loaded, to get the assistance flowing as soon as possible.

The government will also announce a “coronavirus SME guarantee scheme” for small and medium-sized businesses. This is to complement the $8 billion in measures the banks announced last week to defer small business loan repayments for six months.




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The federal government will guarantee 50% through the participating bank of an eligible loan to a small or medium-sized business hit by the impact of the virus. The $20 billion government guarantee will be able to support lending of $40 billion to these enterprises.

Loans will be used for working capital and be unsecured. The guarantee will cover loans granted within six months, from April 1. It will apply to new or existing customers of banks and non-bank lenders.

Lenders will not be charged a fee for accessing the scheme, and it will be repayment-free for six months. The maximum loan will be $250,000, for a term of up to three years.

The scheme will not apply to re-financing present customers – they will benefit from the banks’ announcement of last week.

Scott Morrison was blunt about how bad things will get. “We’re already seeing the devastating economic impact coronavirus is having for Australia’s local businesses. Unfortunately it is going to get worse before it gets better, but it will get better.

“Many of our restaurants and bars, our hotels and tourism operators, our hairdressers and beauty salons and our events companies already feeling the brunt of the economic impact of coronavirus. This is about finding a way for them and their workers to build a bridge to the other side of this crisis,” he said.

“There is a lot of pain coming but we’re going to cushion the blow as best we can.

“We want to help businesses keep going as best they can or to pause instead of falling apart,” he said.

“In the event that someone does regrettably lose their job because of the coronavirus, it’s very important that business give their workers the confidence that this is just temporary, and that when they reopen their doors and get back to business that they will want to get them back on the payroll as soon as possible.”

“Australia’s small and medium businesses are the engine room of our economy. When they hurt, we all hurt.

“The plan we’re rolling out is focused on building a bridge for as many of those businesses and their workers as we can to get them over this crisis. That means supporting wages for small businesses so they don’t need to let go of their staff and ensuring that during the crisis small businesses know we have their backs on their bank loans,” Morrison said.




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Treasurer Josh Frydenberg said: “These are extraordinary times requiring extraordinary measures”.

Victoria has just announced a $1.7 billion assistance package for businesses.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Morrison’s coronavirus package is a good start, but he’ll probably have to spend more


Peter Martin, Crawford School of Public Policy, Australian National University

What makes the prime minister confident most households will spend A$750 delivered in cash, when they mostly wouldn’t spend the A$1,080 delivered in the form of bonus tax refunds after last year’s budget?

Experience.

Here’s how he put it on Thursday, announcing the economic response to the coronavirus:

Australians will be getting a cheque for $750. Now it’s not for us to tell those Australians how to spend their money, but what we do know from experience is that they will spend that money, and that money will encourage economic activity.

That experience was Labor’s.

On October 11, 2008, Labor announced cash payments totalling between $1,000 and $1,400 per eligible household to stave off a retail recession.

It offered still more in February 2009.




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The first cheques went out in December. Spending surged 4% that month after scarcely growing all year. A year on, spending was 5.4% higher than before the cheques went out.

In Japan, the United States, Canada and Germany where stimulus packages were not targeted at consumers, retail spending slipped by 2-3%. In Australia, it surged 5%.

So big was the effect that the payments were staggered by region to ensure cash delivery trucks could top up the automatic teller machines first.

The statisticians collecting retail sales data at the Bureau of Statistics abandoned their usual practice and stopped drawing a trend line.

The jump was impossible to reconcile with the pre-existing trend.


ABS retail trade release, May 2009

The Treasury had searched the economic literature and determined that cash payments were more likely to be spent than tax cuts, and could be delivered much more quickly.

Six million Australians receive government benefits of some sort, whether they think of themselves as on welfare or not. As recipients of family allowance, childcare support, the pension or even the seniors health card, they are on Centrelink’s books. (Centrelink recently changed its name to Services Australia.)

The payment machine that delivered robodebt can just as easily deliver “robocheques”.




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Treasury Secretary Steven Kennedy, who advised Prime Minister Scott Morrison and Treasurer Josh Frydenberg to give households cash this time instead of tax refunds, saw the effect at first hand. He was working in Prime Minister Kevin Rudd’s office as the good news came through.

If there is an important criticism of the Morrison government’s (first) coronavirus stimulus package, it would be that it doesn’t concentrate on households enough.

Household spending accounts for 55% of Australia’s gross domestic product, yet payments directed to households make up only 27% of the $17.6 billion the government is spending.

The package has two primary aims. One is to ensure that spending and production don’t shrink in the June quarter after shrinking in the March quarter, triggering what, for better or worse, people call a technical recession.

The Treasury expects it to boost economic activity by 1.5% in the June quarter.

If it does, it should be enough to compensate for the downturn we would have without it, always remembering that we don’t yet know how bad things will get in the three months to June – how many schools and public gathering places will be closed, and how many workers will have to stay home to care for children who can’t go to school or family members who are ill.




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The second aim is to stop the unemployment rate climbing. When it climbs more than a few points it tends to keep going. In the early 1990s recession it climbed from 6% to 10% in a matter of months.

People who entered the labour force and couldn’t get work were scarred for years.

Labor’s most enduring achievement during the global financial crisis in 2008 and 2009 was to stop unemployment climbing above 6%.

That’s what the government’s $11.8 billion of payments to businesses are aimed at, whether delivered in the form of a boosted instant asset writeoff (available only until June 30), accelerated depreciation, payments to cover salaries, or wage assistance for apprentices and trainees.

Morrison wants businesses in the best possible position to hold onto their workers. He wants them to display “patriotism”.The Conversation

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

The coronavirus stimulus program is Labor’s in disguise, as it should be


John Quiggin, The University of Queensland

The spread of the coronavirus has brought us all face to face with the remorseless logic of exponential growth. A handful of cases has turned into dozens, then hundreds, then thousands.

If current attempts at containment fail, we can expect many millions of cases around the world.




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The government’s economic policy response reflects this dawning reality. The exponential growth of the virus has been matched by growth in the magnitude and scope of the required response.

While the virus was developing in China, and even in the midst of the bushfire crisis, the government was insisting that its wafer-thin surplus would be delivered as promised.

Denial for a while…

Even after it became evident that the budget would be in deficit and the economy close to recession (at least in terms of the widely-used “two quarters of negative growth” criterion), the government’s primary concern was to avoid validating the Rudd government’s response to the global financial crisis.

Estimates of a package of A$2 to $5 billion were leaked, with a strong emphasis on a modest and targeted response, confined to specific sectors such as tourism. The universities, seen as tribal enemies by many in the government, got no sympathy.




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Rather than being treated an export earner in trouble, universities were blamed for relying too much on the Chinese market. The idea of boosting Newstart and other welfare payments was dismissed out of hand.

As the package developed, the power of the “go hard, go early, go household” logic that drove the 2008 response of Prime Minister Kevin Rudd and Treasury Secretary Ken Henry became evident.

…then a focus on what might work

The figure being bandied about rose to $10 billion, and the government’s attempts at product differentiation became ever feebler.

This stimulus, it was claimed, would rely on existing programs (an attempt to keep faith with the spurious attacks on Rudd programs like the school-hall focused Building the Education Revolution).

It would be wound down as soon as the crisis was over (something Rudd’s treasurer Wayne Swan spent years trying and failing to do).

Now we have the announcement of a nearly $18 billion package which is virtually a repeat of Labor’s response to the global financial crisis.

The central elements are a cash handout aimed at sustaining consumer demand, and broad measures to stimulate investment.

Allowing for inflation and population growth, the almost $18 billion cost of this package is very similar to the $10 billion cost of the Rudd government’s first stimulus. It’s highly likely that, as in the GFC, more will be needed in future.

Those numbers doesn’t take account of the impact of the crisis on tax revenues and unemployment benefits.

It is highly likely that the economic aftershocks will be felt for years to come, and to me, it seems possible the impact on the budget may be well over $100 billion by the time Australia recovers.

There’ll be lessons when this is over

The remaining targeted measures to assist specific sectors like tourism have their parallel in the Rudd government’s rescue of the car finance industry through the Ozcar scheme, which gave rise to the (then) infamous “Utegate” scandal.

Looking ahead, the crisis response should kill off not only the idea that a surplus is the hallmark of responsible economic management, but also the absurdity of extending the standard four-year forward estimates period to ten-year projections, which formed the basis of tax cuts legislated years ahead of time.




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As the current crisis and the global financial crisis have shown, even an annual budget can be derailed by an unforeseen shock. Attempting to fix policies ten years in advance is a fools’ errand.

More broadly, this is yet another instance in which policies influenced by the market ideology that took hold in the 1970s has damaged us.

The economic impacts of coronavirus will be made worse by the casualisation of the workforce and the decades-long freeze on Newstart and other welfare payments.

A modern society can only function properly with a strong government and a commitment to looking after everybody. Perhaps the enforced isolation we are likely to face in the coming months will give us time to rethink.The Conversation

John Quiggin, Professor, School of Economics, The University of Queensland

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Cash handout of $750 for 6.5 million pensioners and others receiving government payments


Michelle Grattan, University of Canberra

A payment of $750 will be made from the end of this month to about 6.5 million people as part of the government’s $17.6 billion stimulus package aimed at keeping Australia out of a recession caused by the impact of the coronavirus.

The one-off tax free payment will go to pensioners and others who receive income support, including those who get the family tax benefit – with pensioners numbering about half the beneficiaries.

The payment will cost $4.8 billion, and go out from March 31. Almost all payments are expected to be made by the middle of April, in an attempt to boost spending for the vital June quarter, which will be hit hard by the fallout from the virus.

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Putting cash in the hands of lower income earners is considered the fastest way to stimulate the economy, because they are most likely to spend it – although the health scare makes it trickier to predict how much people could save.

The wide-ranging package is skewed to helping small and medium sized businesses, with the government’s priority being to keep people in jobs. Three out of four dollars will be spent on initiatives to assist business.

These include payments of up to $25,000 for small and medium-sized enterprises (costing $6.7 billion), wage subsidies to support apprentices ($1.3 billion), a widening of the instant asset write off ($700 million), and the acceleration of depreciation deductions ($3.2 billion).




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A $1 billion fund will be directed to help for severely-affected regions and communities. This will include measures such as the waiver of fees and charges for tourism businesses that operate in the Great Barrier Reef Marine Park and Commonwealth National Parks. There will also be assistance for businesses to identify alternative export markets and supply chains.

To help people who need to access government sickness payments or are thrown out of work and require unemployment benefits, waiting times will be waived.

Scott Morrison highlighted the availability of the existing Commonwealth sickness payment, saying a casual employee who for medical reasons had to self-isolate, or who contracted the virus, and was unable to work, could access it.

Notably, the package does not contain anything for the tertiary education sector, despite it being severely affected by the travel ban on non-Australians from China, which sees tens of thousands of students stranded offshore. The government believes the universities generally have strong enough balance sheets to meet the situation.

The package will amount to 1.2% of GDP. Treasurer Josh Frydenberg said Treasury estimated the measures will add 1.5% to growth in the June quarter. Some $11 billion will go out before the end of June. The duration of measures is limited.




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But Treasury has not yet been able to estimate the likely impact of the virus in the June quarter so, with the March quarter expected to be negative, it is unknown whether the economy will experience two quarters of negative growth, which would put it into recession.

The government now acknowledges the budget will be in deficit for this financial year. Finance Minister Mathias Cormann was blunt. “When you deliver a stimulus package of this size, I think people can add up the numbers. They can add up what it means in terms of the budget surplus. … This is not going to be a surplus year in 2019-20,” he told the ABC.

The package comes as the World Health Organisation declared the coronavirus a pandemic – something the Australian government had anticipated a fortnight ago – and the United States banned travellers arriving from Europe for the next 30 days.

Scott Morrison said the measures were “designed to support cash flow, boost investment and provide immediate demand stimulus to the Australian economy”.

The package has marked similarities to the Rudd government’s $10 billion first tranche stimulus in the global financial crisis, notably with its “cash splash” elements, although it is more targeted to business.

The prime minister will make an “address to the nation” at 7pm on Thursday.

The Australian Industry Group said the stimulus measures “will reduce the risk of a more severe downturn and the much worse budget outcome that it would bring”.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Big stimulus package to splash cash, including $25,000 to small and medium-sized businesses


Michelle Grattan, University of Canberra

The Morrison government’s stimulus measures, to be announced Thursday, will include a $25,000 cash flow boost for small and medium-sized businesses, a subsidy to help preserve apprentices’ jobs, and a big expansion of the incentive to invest in equipment.

These three items alone will total A$8.7 billion, in a package which is set to be much larger than earlier estimates.

This indicates the government has responded to warnings about the dangers of not going hard enough, as uncertainty mounts about the ultimate economic fallour from the coronavirus.

Speculation on Wednesday was that the package would exceed $15 billion.

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Scott Morrison paved the way for some cash handouts to pensioners and others on welfare to try to shore up growth quickly. He reminded a news conference the Coalition had supported the first round of the Rudd government’s stimulus (which centred on cash payments for households). “We need to address the demand side and supply side,” he said.

Speaking on Sky on Wednesday night, he pointed to something for pensioners, saying they in particular but also many in similar circumstances would spend any extra money.

The government will provide up to $25,000 tax free to businesses, with a minimum payment of $2000, to help them with wages, extra staff, investment and to buttress against the looming downturn. Businesses eligible will be those with a turnover under $50 million that employ staff.

Businesses that withhold tax on their employees’ wages will receive a payment equal to 50% of the amount withheld, up to a maximum $25,000. Enterprises that pay wages will get a $2000 minimum even if they are not required to withhold tax. The payment will be structured in a manner that speeds money out early on.

The cost of the measure is estimated at $6.7 billion over the forward estimates, with about 690,000 enterprises employing about 7.8 million people benefitting.

The apprentice measure is aimed at protecting some 120,000 apprentice jobs. The government will offer small businesses up to $7000 wage assistance each quarter for each apprentice, to retain existing apprentices and trainees, and to re-employ those who lose their jobs from a small business due to a downturn driven by the coronavirus.




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The employer will get a wage subsidy of 50% from January 1 to September 30. Where a business has to let an apprentice go, a new employer can get the subsidy.

Businesses eligible will be those with fewer than 20 fulltime workers. But businesses of any size, and group training organisations, that re-engage an eligible apprentice will be able to get the subsidy.

The apprentices must have been in training with a small business on March 1. The program will cost $1.3 billion across the current and next financial years.

In an attempt to stimulate some investment quickly, the government will expand the instant asset write off, raising the threshold from $30,000 to $150,000, as well as widening access for firms, from the present annual turnover of up to $50 million to $500 million.

The government is hoping to “supercharge” investment in items like cars and utes, new tools and kitchen equipment.

The expansion is costed at $700 million over the forward estimates.

Morrison said: “We’ve balanced the budget and managed our economy so we can now use this to protect the health, wellbeing and livelihoods of Australians.

“Our targeted stimulus package will focus on keeping Australians in jobs and keeping businesses in business so we can bounce back strongly”.

Former senior bureaucrat Martin Parkinson, who headed treasury and later the prime minister’s department, told the Australian Financial Review the stimulus should be at least 0.5% of GDP, or about $10 billion.

As the tally of Australian coronavirus cases stood at 122 on Wednesday (including three deaths), an increasing number of events are being cancelled and shutdowns occurring.

The government on Wednesday added Italy to the countries from which non-Australian arrivals are banned. The others are China, Iran and South Korea. The ban on Italy is likely to have only marginal impact because that country is already in lockdown.

Treasurer Josh Frydenberg met the CEOs of the big four and other banks on Wednesday. The banking sector flagged it would assist businesses financially affected by the virus.

CEO of the Australian Banking Association Anna Bligh said businesses would be assessed on a case by case basis but the sort of help could include deferral of loan repayments, waiving fees, interest free periods or no rate increases, and debt consolidation.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Australia’s drought relief package hits the political spot but misses the bigger point


Lin Crase, University of South Australia

There are two basic components to the Morrison government’s latest A$1 billion package response to the drought affecting large parts eastern Australia. One part involves extra subsidies to farmers and farm-related business. The other involves measures to create or upgrade infrastructure in rural areas.

Unfortunately, most funds will be misdirected and the response is unlikely to secure the long-term prosperity of regional and rural communities. This is a quick fix to a political problem, appealing to an important constituency. But it misses the point, again, about the emerging economics of drought.

Hitting the political target

The bulk of the A$1 billion package is allocated to a loan fund. The terms of the ten-year loans are more generous than what has been offered in the past. They are now interest-free for two years, with no requirement to start paying back the principal till the sixth year.

Farmers will be able to borrow up to A$2 million. In addition, loans of up to A$500,000 will also be available to small businesses in drought-affected towns.




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Because recipients are not having to pay the full cost, these loans are in practice a form of subsidy.

Subsidies are used by government to make more people undertake an activity than would otherwise be the case. In this case the government is offering a subsidy to keep farmers and small businesses owners doing what they’ve been doing, even though from an economic point of view this might not be very wise at all.

The question that should be asked is: “do we want more or fewer people to be involved in a farming activity that is vulnerable to drought?”

Most farming in Australia is completely reliant on rainfed crops and pastures. Rainfall is already highly variable. All the indicators from climate science is that rain will be even more unreliable in the future.




Read more:
The science of drought is complex but the message on climate change is clear


In addition, the agricultural industries currently drought affected are not just at the whims of rainfall. These industries are constantly changing and being affected by new technologies and market forces.

For most agricultural produce the key market force is price. Sure, some farms and farmers can carve out niche markets, but most farm businesses depend on producing at lowest cost. Increasingly, the farms that survive in a highly competitive global environment do this by exploiting economies of scale. Big farms are thus more profitable than small ones in the good times (such as when it rains); and during the tough times (such as during drought) they have more resources and deeper reserves to ride it out.

Ultimately, this means successful farms are continually getting bigger and small farmers are getting squeezed out.




Read more:
Just because both sides support drought relief, doesn’t mean it’s right


The data also support the view that the farmers who survive and are simultaneously exposed to drought ultimately become even more profitable, because of what they learnt about managing in a difficult environment.

This is not to argue drought is a good thing for any farm, but it does raise a serious question about any government policy that effectively encourages more people to keep doing something when global and technological forces would point to it being unsustainable.

So what’s the point?

The second component of the Morrison government’s relief response involves directing about A$500 million from existing regional infrastructure funds into building roads and other things into affected communities.

While many will welcome this on top of the the extension of loans to small business in country towns, the policy detracts from the serious questions that confront rural and regional communities.

The economics of agriculture has flow-on effects to towns, but it would be wrong to think all are impacted in the same way.




Read more:
Helping farmers in distress doesn’t help them be the best: the drought relief dilemma


As a general rule, when farmers sell up, they tend to leave from the small communities first. The upshot is that small communities get smaller, older and poorer as those least mobile are left behind. These people also generally require more, not less, public support. Mid-size communities tend to level out, while continuing to age. Large regional centres tend to grow and prosper.

The point is that each community requires different things from government. Genuine public goods like roads, health services and education are desperately needed and undersupplied in many cases. Providing cash to a few select businesses and grading a gravel road in this situation belies the complexity of the long-term challenges and fails to address serious issues.

An elderly retiree in a rural town might well ask why their local road or bridge is only upgraded during a drought. Surely, government should focus on providing legitimate public goods for the long term, regardless of the weather.The Conversation

Lin Crase, Professor of Economics and Head of School, University of South Australia

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Greens release annual figures for income tax package


Michelle Grattan, University of Canberra

The Greens have released year-by-year costings of the budget’s income tax cuts, which the government has previously declined to produce publicly.

The estimates have been prepared by the independent Parliamentary Budget Office, at the request of the Greens. The opposition has repeatedly sought annual figures, but the government resisted the demands.

Treasurer Scott Morrison said after the budget: “It is not the practice of any government to provide itemised year by year costs over the medium term, because they’re not reliable.”

Treasury secretary John Fraser told a Senate estimates hearing: “Our confidence in specific years is not such that we feel comfortable providing those figures.”

The government initially released only the cost over the forward estimates ($13.4 billion), and a total decade-long figure (2018-19 – 2028-29) of $140 billion.

Subsequent Treasury estimates were produced for the various stages of the plan: $16 billion for first stage, rising to $102 billion when the second stage is included, with the final figure for all three stages being $144 billion.

The PBO annual estimates are in the table below.

Personal Income Tax Plan budget analysis by Parliamentary Budget Office

https://www.scribd.com/embeds/381032653/content?start_page=1&view_mode=scroll&access_key=key-xCv8nXnigTA927vSL9G7&show_recommendations=true

The PBO numbers will go to the Senate Economics Legislation Committee hearing on Wednesday. Labor also asked for PBO calculations.

The Greens said the PBO costings showed that stage 2 of the plan would lose $80 billion in revenue over the next ten years while stage 3 would lose $41.6 billion.

The party called on Bill Shorten and Labor to join the Greens “in ruling out support for Turnbull’s personal income tax cuts”.

Labor has said it supports stage one, is making up its mind about stage 2, and does not like stage 3. But it has not clarified what its position would be if the government sticks to its position that it won’t split the bill.

Greens leader Richard Di Natale: “It is beyond belief that the Labor Party is even considering supporting the second stage of Turnbull’s personal income tax cuts that will turbocharge economic inequality in Australia and lead to the loss of $80 billion in revenue for our schools, hospitals and essential services.

“Nearly $40 billion of this second stage will go to the wealthiest one-third of income earners.”

Di Natale said Labor was also floating the idea of passing the whole package through the Senate. “This would see Labor also support the third stage of the plan, which is worth $41.6 billion over five years, with the amount going to the wealthiest Australians compounding by an extra billion dollars each year.

The Conversation“In the final year of the Turnbull’s tax cuts, almost 70% of the entire benefits flow to people earning over $90,000,” he said.

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

EU Visit to Orissa, India Triggers Barrage of Accusations


Hindu nationalists protest delegation as Christians cite injustices.

NEW DELHI, February 8 (CDN) — A delegation from the European Union concluded a “fruitful” trip to India’s violence-torn Orissa state on Friday (Feb. 5) amid a swirl of protests by Hindu nationalist groups and cries of injustice by Christians.

The delegation was able to hold “open and frank” discussions with Kandhamal officials on the visit, said Gabriele Annis of the Embassy of Italy.

“We had a very good meeting with the Kandhamal district administration,” Annis told reporters. “It is fruitful. We had open and frank discussion. It helped us in understanding the situation and understanding happenings over the past 15 months.”

The delegation was led by Christophe Manet, head of Political Affairs of the European Commission delegation to India and consisted of members from Spain, Hungary, Poland, Ireland, Italy, Netherlands, the United Kingdom, Finland and Sweden. A delegation from five European countries had visited Orissa earlier in November 2009, but the government of Orissa denied them permission to visit Kandhamal district, where Christians say they continue to be threatened and destitute.

Archbishop Raphael Cheenath said on Saturday (Feb. 6) that despite the claims of the state and district administrations, life for the Christian victims of violence in August-September 2008 remains far from normal: thousands still live in makeshift shanties along roadsides and in forests, he said, and local officials and police harass them daily.

“The block officers have been playing with the facts, indulging in corrupt practices and cosmetic exercises whenever political and other dignitaries come to visit or inspect,” the archbishop said in a statement. “Innocent people are coerced into giving a false picture. The chief minister must investigate the role and functioning of the entire district administration . . . It is strange that officers in whose presence the violence took place and thousands of houses were burnt are still in office and are declaring that there is peace in the district.”

Following attacks in the area after Hindu extremists stirred up mobs by falsely accusing Christians of killing Hindu leader Swami Laxmanananda Saraswati on Aug. 23, 2008, more than 10,000 families were displaced from their homes by the violence. Since then, Cheenath said, an estimated 1,200 families have left the area. Between 200 and 300 families reside in private displacement camps in the district, and more than 4,400 families still live in tents, makeshift shelters or the remnants of their damaged houses, he said.

The number of attack victims who have received financial assistance from the government, churches or Non-Governmental Organizations (NGOs) is unknown, but is estimated at 1,100 families, Cheenath added.

He criticized Prime Minister Manmohan Singh and the Chief Minister of Orissa Naveen Patnaik saying, “Both of them had promised to provide adequate compensation for the damages caused during the 2008 communal violence. But the victims have not been adequately compensated.”

Cheenath said the state government had decided not to compensate any riot-affected religious institutions even though India’s Supreme Court had directed the government to compensate them for all damages.

“This is a national calamity and demands a special package for the affected people, which should include land, income generation, education and healthcare,” the archbishop said.

Extremist Makeover

Prior to the visit, Christian leaders expressed their shock at Kandhamal district authorities attempting a cosmetic makeover by evacuating nearly 100 Christians from G. Udayagiri.

In letters to the EU delegation, the state government and national human rights and minorities commissions, Dr. John Dayal of the All India Christian Council narrated the plight of the 91 members of 21 families from 11 villages who were living under plastic sheets along a road in the marketplace area of G. Udayagiri.

Dayal said the group included 11 married women, three widows, an elderly man with a fractured hip and thigh, and two infants born in the camp. They had faced almost daily threats, he said, as they had not been allowed to return to their villages unless they renounced their faith and became Hindus.

Soon after the decision to allow the EU delegation, the water supply to the makeshift site was cut off and police and civil officers drove away the residents, who had only plastic sheets to protect them from the cold, he said. The refugees said officers later gave them permission to come back at night but to keep the area clear.

“The families are in G. Udayagiri, they have moved in front of the road, and they are in a very bad state,” the Rev. Samant Nayak of G. Udayagiri told Compass. “They are literally on the road.”

He said that approximately 55 families were living in G. Udayagiri, where they had been given land, and a Christian NGO was helping to construct houses for them.

The Press Trust of India reported that Orissa officials were nervous about last week’s delegation visiting Kandhamal but finally gave permission under pressure from the central government. State officials finally allowed the visit with the pre-condition that the delegation would be allowed only to interact with people and not engage in fact-finding, according to a senior official in Orissa’s home department.

The Kandhamal district collector, Krishna Kumar, told Compass that all went well and “no untoward incidents took place,” but sources reported at least one minor disturbance in Bodimunda village. On Wednesday (Feb. 3), one house was reportedly damaged there in a scuffle that also resulted in two arrests by the local police.

During their Kandhamal visit, the EU delegation was reportedly forced to cancel a meeting with judges of Fast Track courts established in Phulbani, in Kandhamal district, to prosecute hundreds of those accused in the 2008 violence, due to protests from the local lawyers’ association.

Kumar, however, pointed out that the lawyers’ protest was secondary to the lack of clearance from the High court for the meeting with the judges. “The same was not informed to us prior to the visit,” he added.

Justice Denied

The anti-Christian violence in August-September 2008 killed over 100 people and burned 4,640 houses, 252 churches and 13 educational institutions. Archbishop Cheenath said justice is critical to long term peace.

“The two Fast Track courts, and the court premises, have seen a travesty of justice,” he said in the Feb. 6 statement. “Witnesses are being coerced, threatened, cajoled and sought to be bribed by murderers and arsonists facing trial. The court premises are full of top activists of fundamentalist organizations. The witnesses are also threatened in their homes with elimination, and even their distant relatives are being coerced specially in the murder and arson cases against Member of Legislative Assembly [MLA] Manoj Pradhan.”

Though some witnesses have testified on Pradhan’s alleged involvement in crimes in depositions, he has been acquitted in case after case, the archbishop added.

“We are demanding a special investigation team to investigate every case of murder and arson,” he said. “Similarly, there is also need for transferring the cases against politically powerful persons such as Pradhan to outside Kandhamal, preferably to Cuttack or Bhubaneswar.”

Cheenath said victims have filed 3,232 complaints at Kandhamal police stations, but officers registered only 832 cases. As many as 341 cases were in the G. Udayagiri area alone, 98 in Tikabali and 90 in Raikia, he said.

“Even out of this small number [in G. Udayagiri], only 123 cases were transferred to the two Fast Track courts,” he said. “So far, 71 cases have been tried in the two courts, and 63 cases have been disposed of. Of these, conviction occurred only in 25 cases, and even that is partial as most of the accused have not been arrested or brought to trial.”

Only 89 persons have been convicted so far in Orissa state, while 251 have been acquitted, supposedly for lack of witnesses against them, he said.

“Among them is Manoj Pradhan,” Cheenath said. “It is strange that in the case of 10 deaths by murder, nine cases have been closed without anybody being convicted, while there has been partial conviction in the case of one death. Who will bring justice in the case of the nine murder cases?”

The archbishop demanded that independent lawyers be allowed to assist overworked special public prosecutors.

Hindu Nationalist Protests

Protesting the delegation visit was the Vishwa Hindu Parishad (VHP) and other Hindu nationalist organizations. VHP State General Secretary Gouri Prasad Brahma had lamented on Jan. 31 that the visit would trigger tension and demanded their immediate withdrawal.

“There is no business of the outsiders in the internal matter of the state,” he said.

The delegation also faced the ire of the Hindu extremist Bajrang Dal on the day of its arrival in Bhubaneswar, capital of Orissa, on Tuesday (Feb. 2). Hundreds of its cadres met the delegation at the airport shouting loudly, “EU team, go back.”

Five Bajrang Dal members were detained for creating trouble, Deputy Commissioner of Police H.K. Lal told media on Wednesday (Feb. 3).

After the delegation had left, the Orissa Bharatiya Janata Party (BJP) heavily criticized the central and the state governments, with BJP state President, Jual Oram telling a press conference that the state had allowed the visit to “divide people on communal lines.” He said that the delegation had not met any Hindu leader during their visit to Kandhamal, which “exposed their communal agenda.”

Oram accused the delegation of violating protocol in trying to meet the judges of fast-track courts in Kandhamal, saying this “amounted to interference into internal affairs of a sovereign independent member state under the U.N.”

At the same press conference, BJP MLA Karendra Majhi said that allowing the visit was an attempt by the chief minister to win back the confidence of minority Christians. He alleged that the delegation had held secret meetings in a Catholic church at Phulbani with church leaders and select NGOs to facilitate conversions to Christianity.

“I have every reason to believe that the promised assistance of 15 million euros to Kandhamal by the EU delegation will be utilized for conversion activities,” Majhi said.

Report from Compass Direct News