The Business Council of Australia welcomes the opportunity to make this submission to the consultation for the Independent Evaluation of the JobKeeper payment.

The JobKeeper program was the single biggest federal government intervention in the history of the Australian economy and the largest part of the fiscal stimulus designed to address the COVID-19 pandemic. As the consultation paper notes, the program cost around $89 billion (4.5 per cent of GDP), was taken up by around one million businesses and covered around one-third of all employees. Given the magnitude of the intervention, it is entirely appropriate that the scheme is independently and rigorously evaluated to establish its overall efficiency and effectiveness. In particular, given the substantial fiscal cost of the scheme, it is important that the opportunity is taken to learn lessons from its design, implementation and performance and to apply these lessons to future policies intended to address sudden and severe economic shocks.

Any evaluation of JobKeeper should proceed on the basis of the original policy intent and the actual circumstances in which the scheme was formulated and introduced.

There is an academic consensus that the scheme maintained employment at a level of around 700,000 to 800,000 jobs higher than it would have been relative to a no-JobKeeper counterfactual. To that extent, JobKeeper not only saved jobs, but also supported aggregate demand and preserved employer-employee relationships that would otherwise have been severed through job loss. The overall macroeconomic effects of JobKeeper were consistent with the intent of the policy.

At the same time, it is also widely recognised that the JobKeeper scheme was expensive per job saved. This cost was partly a function of the inability to target support more narrowly using more nuanced eligibility criteria. The need to implement JobKeeper quickly meant that there was a steep trade-off between its macroeconomic impact and precision in targeting.

The parameters of the scheme had to be consistent with existing administrative arrangements that determined what payments would be made and the information used for determining eligibility. Payments were made on a flat, one-in-all-in basis for eligible employees, regardless of whether those employees would have been laid-off or stood down in the absence of JobKeeper. The initial flat $1,500 per worker rate of JobKeeper meant that it also acted as a wage floor, raising wages for many part-time employees above their normal earnings.

The main lesson from this experience is that the federal government should plan and possibly legislate for future responses to severe economic shocks that can be implemented quickly, while also being better targeted. These responses could entail transfer payments and wage subsidies that are triggered by the declaration of a natural disaster or state of emergency, with payments based on pre-determined eligibility criteria. This would support a more timely response to these contingencies and reduce the uncertainties associated with delayed implementation.

The COVID-19 shock was unusual in affecting the entire economy. However, future economic downturns or natural disasters may still require large scale fiscal interventions to support aggregate demand and the supply-side of the economy. Fiscal transfers to households and business have been a common feature of the federal government response to major shocks. The government should carefully consider and develop systems designed to deliver more timely and more targeted support to households and business in response to future shocks, drawing on the experience with JobKeeper.

Read or full submission here.