Government announces overhaul of JobKeeper and JobSeeker programs

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July 21 2020
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The Morrison government will extend JobKeeper and JobSeeker beyond September, but eligibility will change as the government looks to reign in some of its spending, a Treasury update has revealed.

The overhaul was revealed on Tuesday, 21 July, prior to full details being released by Prime Minister Scott Morrison and Treasurer Josh Frydenberg in an economic update on 23 July.

“JobKeeper has been an economic lifeline to millions of Australians and that lifeline will be extended for those businesses that need it most,” Mr Frydenberg said.

Prime Minister Scott Morrison and Treasurer Josh Frydenberg have announced that the current $1,500 per fortnight JobKeeper payment will be reduced to $1,200 per fortnight from 28 September, and $750 per fortnight for employees working less than 20 hours a week.

From 4 January, the rate will again fall to $1,000 per fortnight, and $650 for people working less than 20 hours a week.

The program will run to 28 March 2021, at a further cost of $16 billion, taking the entire JobKeeper program to $86 billion.

The changes to JobKeeper include two payment tiers to help align wages closer to pre-COVID incomes and a rebalancing of the $550 a week JobSeeker program.

“The review of JobKeeper found that the program has been well targeted to those businesses that suffered an average decline in turnover in April of 37 per cent compared to the same month last year,” Finance Minister Mathias Cormann said.

“What the review also found was that there were a number of features of JobKeeper that created adverse incentives which may become more pronounced over time as the economy recovers. This formed part of our considerations as we looked at the next phase of the JobKeeper program.”

Changing rates

The Treasury’s update revealed that one in four of the 3.5 million Australians on the JobKeeper program is currently benefiting from higher wages.

A quarter of those Australians with higher salaries are earning $550 more than they were before the COVID-19 shutdown.

It is understood that the government will adopt two payment tiers to more closely reflect the incomes of those who previously worked fewer hours.

“JobKeeper was designed to prioritise macro-economic support and speed and ease of implementation,” the Treasury said.

“However, JobKeeper has a number of features that create adverse incentives which may become more pronounced over time as the economy recovers.

“It distorts wage relativities between lower and higher-paid jobs, it dampens incentives to work, it hampers labour mobility and the reallocation of workers to more productive roles, and it keeps businesses afloat that would not be viable without ongoing support.”

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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