Finance Minister Mathias Cormann says the Morrison government is working on a wage subsidy plan, as a leading economist warned the unemployment rate could soar to 17 per cent by Easter as the coronavirus bites.
The government has resisted the idea of a wage subsidy similar to the UK, which would fund 80 per cent of the payroll of a business so it can keep its workers on the payroll rather than having to join a lengthening dole queue.
“We are going to do it in an Australian way,” Senator Cormann told ABC television’s Insiders program on Sunday.
“We’re going to do it in a way that actually is going to be able to be delivered, using our existing systems and our existing architecture.”
He said from his understanding, the UK’s plan had yet to be rolled out.
“We are working very hard on further expanding the level of income support through businesses to enable more businesses either to stay in hibernation or to survive through this difficult period ahead for a strong bounce back on the other side,” Senator Cormann said..
He declined to go into the specifics of the plan but said the government intended to make an announcement “over the next few days”.
This will form part of the government’s third stimulus package – two previous packages total more than $80 billion – aimed at trying to shield the economy as much as possible from the impact of COVID-19.
Even so, former ANZ chief economist Warren Hogan said the crisis had rapidly become an employment problem.
“I think a wage subsidy is critical at this juncture … because we have such a significant amount of jobs losses,” former ANZ chief economist Warren Hogan told Sky News.
Treasury had estimated the impact of the coronavirus would see an additional one million people out of work, but already firms are shedding or have stood down between 60 to 90 per cent of their staff.
“I think very quickly we can talk about out over a million jobs being lost. It looks like were going to get through that in very short order,” Mr Hogan said.
“I think by the time we get to Easter we are going to probably see about 1.5 to 1.8 million job losses due to standdowns.
That would see the unemployment rate soar from 5.1 per cent as of February to somewhere above between 15 and 17 per cent.
Senator Cormann said having doubled the level of income support under the JobSeekers payment, formally called Newstart – the government is also going to ease restrictions in terms of partner income.
This will that ensure that those with partners who are seeking support will not be negatively impacted.
The current partner income test kicks in once a partner earns more than $48,000.