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What will happen when government wage support ends?

Though Australia is in an enviable position compared with many of its international counterparts following its COVID-19 lockdown measures, the fact remains that businesses must now contend with rising unemployment, a customer base grappling with the reality of living in a recession and, soon, a lack of government support.  

Over 800,000 Australians are now unemployed, according to the Australian Bureau of Statistics, up from just over 700,000 in January.

Although the JobKeeper payments began only eight weeks ago, and underdelivered by almost $60 billion, the Coalition government is already reviewing the scheme’s impact on Australian businesses with an intention to end it in September.

And Prime Minister Scott Morrison expects to see more businesses collapse when the tap is turned off.

“Without these measures, businesses would have simply fallen over, never to reopen again,” Morrison said on Monday morning.

“This still may ultimately be the experience for some. But for many more, these measures will have provided the bridge they needed. That is why these supports are only temporary.”

Morrison’s plan to cut the government’s support measures flies in the face of almost all advice and recommendations being made by business leaders, who fear that the recently announced recession is very likely to worsen should more workplaces go under.

In a survey of 2300 business leaders by the Australian Institute of Company Directors, 81 per cent said that they wanted the JobKeeper scheme to be extended in a more cautious and conservative way.

And this survey is backed up by the results of the May Australian National University poll, which found that of the 3219 Australians surveyed, 57.6 per cent said that extending JobKeeper and JobSeeker would do a great deal to mitigate Australia’s economic issues.

According to Paul Zahra, CEO at the Australian Retailers Association, the support measure has acted as a lifeline for many retailers, allowing them to retain staff and ideally, it could continue.

“We expect retailers will need some level of ongoing support and, like other programs, JobKeeper will require ongoing review and potential adjustment,” Zahra told Inside Retail.

“Retail is one of the hardest hit sectors of the economy, alongside hospitality and tourism, and recovery will be slow.”

National Retail Association chief executive Dominique Lamb agreed, and added that should the next Annual Wage Review result in a wage increase, the government may need to offer grants to assist businesses in meeting wage costs.

“The end of the JobKeeper program is by no means the end of the road to recovery,” Lamb said.

“Businesses will need continued support, which may include grants, tax concessions and further rent relief.”

However, Morrison’s attention seems to be on stimulating infrastructure projects following the end of support measures. He has outlined plans to deliver new rail and road projects, as well as an underwater power cable between Victoria and Tasmania, in an effort to support around 66,000 jobs.

While this could go some way to stimulate a hibernating economy, the hundreds of thousands of unemployed Australians are more likely to focus on saving, rather than spending at their local shopping centre.

And while retailers could save money on wages should the minimum wage be frozen, as a slight majority of Australian economists recommend, according to a survey by The Conversation, this could lead to a further decline in spending.

“A wage freeze… could flow through to millions of Australians on awards and affect the wages of millions more through the enterprise bargaining process,” wrote The Conversation.

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