Treasury says the jobkeeper wage subsidy program will now cost the budget $70bn rather than $130bn because of a reporting error in estimates of the number of employees likely to access the scheme, and because the impact of Covid-19 on the Australian economy has not been as severe as expected.
The error was reported by the department in a statement posted on its website on Friday afternoon. Treasury initially expected that 6.5 million Australians would access the subsidy, but the department has now halved that estimate, in part because the “level and impact of health restrictions” were not as severe or long-lasting as anticipated.
Treasury said the mistake in the enrolment applications was picked up by the Australian Taxation Office when it reviewed the forms. Instead of reporting the number of employees they expected to be eligible, some businesses reported the amount of assistance they expected to receive.
“The enrolment forms completed by 910,055 businesses who have self‑assessed as eligible under the scheme had indicated that this program would cover around 6.5 million eligible employees,” the statement said.
“The ATO’s review of these forms has found that around 1,000 of those businesses appear to have made significant errors when reporting the estimate of eligible employees on their enrolment form.”
Given fewer employees will ultimately access the scheme, which is the centrepiece of the Morrison government’s Covid-19 economic stimulus program, news of the error will embolden a campaign to include people initially excluded from the subsidy – such as staff at universities, workers employed by overseas-owned companies, and casuals employed for less than 12 months.
Less people eligible to access the wage subsidy means a budget underspend, but it also means fewer workers will remain connected to jobs, and there will be less stimulus for the economy during the downturn triggered by the coronavirus pandemic.
Labor has called for the scheme to be extended to more workers who lost their jobs when state governments locked down non-essential services in March, but Scott Morrison and Josh Frydenberg face internal pressure to wind back the level of fiscal support.
Frydenberg, the treasurer, said late on Friday the mistake was good news for the budget and for taxpayers, because borrowing would be less than anticipated. “This is not an invitation to spend more money, but rather to ensure that the program gets to those people who need it most.”
He said tweaks to the program were possible but “we’re not making wholesale changes to the jobkeeper program. We’ll have a review, as we’ve always stated, midway through the program, and we’ll wait for the results of that review.”
Frydenberg said there were no underpayments or overpayments associated with the error. “What has occurred here is a revision in the number of people that are covered by this program,” he said.
But the Labor leader, Anthony Albanese, said the error disclosed on Friday “was a mistake you could have seen from space”. He said this was now a competence issue for the Morrison government. “The fact is if you can’t get this right, how can you get the economic recovery right?”
He said working people had missed out on income support because the government said its jobkeeper program was fully subscribed and the $130bn had all been allocated. “We know now that that isn’t the case.”
“There are one million casual workers who have not received support, and local government workers who have not received support,” Albanese said.
“Entire sectors such as the arts and entertainment sector have not received support. At the same time, this smug government has, time after time, repeated figures that are wrong to the tune of $60bn, and wrong to the tune of three million.
“One number that we needed to get right is how many workers [the government was] helping, but instead, this is an absolute shambles, and again, the consequences are there for people – people who are not getting the support that they need, which means that the recovery will take longer, which means that the economic downturn will be deeper, and it means that the consequences will be more severe for working Australians who are doing it really tough during this period.”
The error does not alter Treasury’s forecast of the unemployment rate. Treasury continues to expect the unemployment rate to peak around 10%, although it placed a caveat on that expectation in Friday’s statement.
“As indicated by last week’s [Australian Bureau of Statistics] labour force survey, the measured level of … unemployment is highly uncertain given the impact of social distancing restrictions on the participation rate.”