The federal government’s plan to cut off COVID-19 payments is partly to encourage states to open up faster and remove more rules, Treasurer Josh Frydenberg said, despite business and social groups warning lockdowns may continue beyond 80 per cent vaccinations.

In a veiled challenge to states that are not opening as fast as the Morrison government would like, Mr Frydenberg said premiers “need to factor in” the end of payments when setting their post-reopening rules.

It threatens to set off another stoush between state and federal governments, with New South Wales and Victoria’s reopening roadmap forecasting no return to large capacities in hospitality or events for the foreseeable future.

NSW, Victoria and the ACT remain in lockdown. Photo: AAP

“We need to be cautious about removing support prematurely when businesses are experiencing significantly reduced trade,” said Andrew Keller, chief executive of the Australian Chamber of Commerce and Industry.

“Many employers and employees, such as those working in international tourism, will face ongoing challenges after lockdowns end.”

Frydenberg wants states to ‘move more quickly’

Mr Frydenberg announced on Wednesday that federal support for workers who had lost hours due to lockdowns would be wound back when states reach 70 per cent vaccination.

He said the support – currently running at more than $1 billion a week – could not continue forever, and noted lockdowns would be less likely at high vaccination rates.

But as The New Daily reported, the Doherty Institute modelling clearly warns at least moderate lockdowns could be needed for 50 per cent of the year upon reopening, unless “low” level continuing rules and capacity limits were maintained.

Those continuing rules mean industries like hospitality, entertainment and tourism may be indefinitely hamstrung, kept far below their pre-COVID capacities.

Large entertainment venues and restaurants have already warned they may not be able to operate under the strict rules of NSW and Victoria’s state reopening plans.

Treasurer Josh Frydenberg has warned Australia faces a “new world”.

Mr Frydenberg all but ruled out further support for lockdowns or industry shutdowns in future, saying the Doherty modelling forecast lockdowns as being “unlikely” but “very temporary and very targeted” if needed.

He hinted that he believed the issues could be avoided if state governments allowed “easier restrictions” at high vaccination rates.

“They need to ask themselves the question, can they move more quickly to ease those restrictions?” Mr Frydenberg said.

“My message to the premiers is … ease those restrictions.”

Mr Frydenberg also announced an extra round of financial support for Victoria and the Australian Capital Territory on Thursday, aimed at bridging the gap to the 80 per cent vaccination marks.

The $2.27 billion program for Victoria is for “businesses most affected by restrictions”, including hospitality, beauty and retail.

NSW, Victoria plan long-term restrictions

The reopening plans in Sydney, Melbourne and Canberra all have stringent capacity limits, while states like Queensland and Western Australia have not guaranteed opening their borders, meaning certain industries will be affected long term.

Mr Frydenberg shrugged that off, saying it was a matter for those states, and making the case that they should change their tack.

The Treasurer, a frequent critic of Victoria’s lockdown management, said the state government’s roadmap to easing restrictions was too slow, and urged Premier Daniel Andrews to “catch up to NSW”, which he said was moving faster.

But even NSW’s roadmap still lays strict capacity limits and restrictions.

Even at 80 per cent vaccination, NSW venues and shops will be limited to one person per four square metres, only 500 people can attend seated ticketed events, and major outdoor facilities like stadiums and racecourses can only go above 5000 people with an exemption.

Lockdowns could continue past 80 per cent vaccination. Photo: AAP

Density limits only move to one person per two square metres on December 1, but nightclubs are still limited to four square metres.

Those rules would see major sectors like entertainment, events, hospitality and recreation heavily affected even beyond December, the holiday or ‘peak’ season for many of these industries.

Premier Gladys Berejiklian said NSW would likely have “a much more targeted approach” to business support in future.

State Treasurer Dominic Perrottet said the state government would continue its support programs until December, even if the federal government wouldn’t.

“We know that when we do open up at 70 and 80 per cent, there will be still some restrictions in place, that businesses will not be operating at full capacity,” he said on Thursday.

But on Melbourne’s roadmap, things will be opening even more cautiously.

At 70 per cent vaccination, entertainment venues and hospitality will be outdoor only and with just 50 patrons, while casinos and arcades remain closed.

Swimming pools, general retail, hairdressing and accommodation can operate only at vastly reduced capacities.

Even at 80 per cent, entertainment and hospitality will be capped at 150 patrons indoors, nightclubs will have seated service only, and community sport is capped at the four square metre rule.

Mr Frydenberg said the federal changes should force a rethink of state rules.

“Of course states will need to factor in the economic supports that are available in making their decisions about the various domestic settings that they have,” he said.

Labor’s deputy leader Richard Marles warned “some restrictions which will impact the economy will remain in place” long after reopening, criticising the government for winding back the support now and leaving “a whole lot of people totally stranded”.

“There are a whole lot of parts of the economy, which still aren’t back to normal and won’t be once we hit 80 per cent levels of vaccination,” he told 2GB.

The Australian Council of Trade Unions called the plan to wind back payments as “dangerous” while the Australian Council of Social Service said it was “unconscionable”.

The ACCI said businesses would be hurting for months to come.

“Support should reflect that the ongoing impacts of lockdowns and restrictions will not be experienced evenly across the business community,” Mr Keller said.