In a senate inquiry today, Reserve Bank Governor Philip Lowe suggested that the JobKeeper payment could be extended beyond its September expiry date, or potentially even survive in a different form.
While the current downturn is not as severe as initially projected, Lowe warned that the economic stimulus should not be phased out too early.
“If we have not come out of the current trough of economic activity, there will be - or there should be - a debate about how the JobKeeper program transitions into something else,” he said.
The Federal Government rolled out the wage subsidy in late March to help preserve the connection between companies and employees. It has repeatedly said the program is only temporary.
But Lowe said there may be a push to keep JobKeeper around for those in particularly hard-hit industries, such as the tourism sector, which may be struggling to stay afloat for months or even years to come.
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Lowe admitted that the program was prepared at a time of extreme uncertainty during which a six month hibernation of the economy seemed like a very real possibility.
While that belief hasn’t exactly been borne out, a massive blow has been dealt to Australians’ confidence. The shape and timing of economic recovery will depend on how quickly that confidence is restored.
Unemployment also remains high, with the latest labour force data to come out described by the RBA boss as “shocking.” Nearly 600,000 people lost their jobs in April, and that number is expected to increase over the coming months.
“We know from previous sharp economic downturns that there is scarring in the labour market. People fall out of jobs and then have trouble getting back in and then we have more long-term unemployment,” Lowe said.
Right now, the real rate of unemployment is obscured by the number of people who are working zero hours but still on their company’s payroll, as well as those who have exited the labour force completely.
A more useful picture is provided by the number of hours worked, which declined by 9% in April. The RBA expects it to drop further in May, though not as sharply.
Lowe also spoke of the need for a reform agenda centred around creating a favourable climate for businesses to “expand, invest, innovate and hire people.”
A big part of that will involve rethinking both the tax system, which Lowe claims is not “optimally designed for growth,” and our approach to regulation.
For information about the assistance available to households and businesses, along with tips to keep your finances in good health amid the current crisis, browse our guide to coronavirus and your finances.