Treasury considered imposing a clawback mechanism for jobkeeper three months into the wage subsidy scheme, but chose not to change the rules because that would have “reduced the overall level of activity and muted the recovery”.
The Scott Morrison government has been criticised for providing generous support to businesses that increased profits and revenue during the pandemic – in contrast with the Coalition’s more punitive approach to chasing welfare debts.
A new report from Treasury – which analyses the first six months of jobkeeper – acknowledged that $11.4bn and $15.6bn in the June and September quarters of 2020, respectively, was paid to businesses whose turnover did not decline by the required 30% or 50% compared with a year earlier.
Of that, the Treasury report found $13.8bn was paid to businesses with a turnover increase compared with a year earlier. About $6.8bn and $6.4bn in the June and September quarters, respectively, was paid to businesses whose turnover fell but not by the requisite amount.
The jobkeeper program required businesses to estimate whether their turnover would decrease by 30-50%, depending on their size, but no clawback provision was included to recoup money from those that outperformed expectations.
Treasury says at least $4.9bn of the $13.8bn paid to businesses with higher turnover through the year went to growing or changing businesses. “These businesses were allowed to use a different test to determine their eligibility for jobkeeper to more accurately reflect the size of the business at the onset of the pandemic,” Monday’s report states.
Guardian Australia has confirmed there was significant debate within Treasury three months into the program about whether or not to claw back payments from businesses that were performing better than expected.
But officials ultimately advised against that course of action in part because the subsidy was doing the bulk of the heavy lifting in the Morrison government’s fiscal response – and due to concerns some businesses could have deliberately reduced their turnover to ensure they could continue to access the wage subsidy, which would have impeded the economic recovery.
Treasury’s report states: “A mechanism to claw back payments from businesses that performed better than expected was not included, reflecting a desire to avoid any disincentives for businesses to adapt and recover.”
“The introduction of such a mechanism would likely have reduced the overall level of activity and muted the recovery.
“This judgment reflected the still heightened uncertainty surrounding both the pandemic and the economic recovery, the weak economic conditions at the time, and the role that jobkeeper was playing as part of the broader macroeconomic response.”
Treasury said the data suggested that after the wage subsidy was introduced, job shedding “declined sharply in these businesses and employment outcomes substantially recovered, with estimates suggesting around 200,000 jobkeeper workers were brought back once the policy was introduced”.
The federal treasurer, Josh Frydenberg, said on Monday that jobkeeper was always more than just a wage subsidy – “it was designed to ensure the strongest possible economic recovery and avoid the scarring impacts on the labour market, which were characteristic of previous recessions”.
Frydenberg declared the program did what it was intended to do. “It kept employers and employees connected,” he said. “It saved more than 700,000 jobs and it supported Australia’s world-leading economic recovery.”
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Treasury says if the government had failed to provide significant fiscal support, including the wage subsidy, the peak of the unemployment rate would have been at least five points higher.
As controversy has escalated about the design of the scheme, there have been moves in the parliament to force greater disclosure about jobkeeper recipients. But in September, the Senate rejected a bid to reveal the biggest 10,000 companies that received jobkeeper wage subsidies after One Nation senators backtracked and opted for a weaker form of disclosure.
The Australian Taxation Office has recovered $194m in ineligible overpayments, and it pursuing another $89m, with $6m in dispute. But the ATO has also opted not to pursue $180m in jobkeeper paid to ineligible businesses due to “honest mistakes” by employers claiming the money.
But the Morrison government has sent more than 11,000 people Centrelink debt letters worth a total of $32m claiming they were overpaid due to jobkeeper while resisting calls to claw back money from businesses who got the wage subsidy and then made a profit.