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Australia uncovers extra A$60bn in welfare stimulus error

Treasurer says ‘no underpayments were made, no overpayments were made’.
Image: Daniel Acker, Bloomberg News.
Australia’s government is A$60 billion ($39 billion) better off after it was revealed about a thousand companies had made “significant errors” in estimating the number of their employees eligible for welfare support.

The most common error was made by more than 500 firms, who said they had 1,500 employees eligible for the “JobKeeper” subsidy, instead of one person, the Australian Taxation Office and Treasury said in a statement Friday. An employee is eligible for A$1,500 each two weeks, which may explain the error in filling out the applications.

Treasury initially estimated JobKeeper, which pays employers a subsidy to keep workers employed, would cover 6.5 million people; and the initial response from businesses — including errors — suggested that figure was about right. It turned out instead that about 2.9 million people are using the program, with Treasury now saying it will end up supporting about 3.5 million.

“This is a very uncertain time,” Treasurer Josh Frydenberg, who oversees the departments, told Australian Broadcasting Corp. after the announcement of the mistake. “I’m not blaming Treasury and I’m not blaming the ATO. What I’m saying is that no underpayments were made, no overpayments were made. This is a massive program with a revised costing of $A70 billion. And this is all borrowed money.”

The initial program’s cost was estimated at A$130 billion, and with the revised outlay now seen at A$70 billion, that leaves A$60 billion unspent. The initial estimates by the government weren’t linked to payments, so weren’t as carefully analyzed, according to the statement.

What Bloomberg’s economists say

“There are two upsides to the revised JobKeeper estimates. First, less businesses and employees have been affected. Hopefully that’s consistent with damage to the economy being less severe. Second, the estimated A$60 billion saving adds to the potential fiscal firepower able to be deployed as the economy moves into the recovery phase.”

James McIntyre, economist

Treasury said its view of the labor market is unaffected by the reporting error. It remains the case that in the absence of the JobKeeper program, unemployment would have been around 5 percentage points higher, it said, adding it continued to expect the jobless rate to reach around 10%.

Opposition Leader Anthony Albanese was quick to criticize the government over the error, which he said meant thousands of unemployed workers may have missed on the payments.

“This is a mistake you could have seen from space, and this is a government that couldn’t run a bath,” Albanese told reporters in Sydney. “The idea that we will ever again listen to Josh Frydenberg and think that he has any credibility at all is gone.”

© 2020 Bloomberg L.P.

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