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27 days until JobKeeper ends: Here’s what will happen next

JobKeeper is ending. Here's what to expect. (Source: Getty)
JobKeeper is ending. Here's what to expect. (Source: Getty)

Experts have predicted “modest” job losses and a minimal impact on unemployment when JobKeeper concludes at the end of the month.

The “fiscal cliff” feared at the other side of the JobKeeper scheme’s end on 28 March will likely not materialise, prominent economists have said.

Yahoo Finance breaks down what we can expect to happen after businesses roll off the scheme.

First things first: What do we know about JobKeeper?

The JobKeeper wage subsidy scheme was first unveiled as part of the $130 billion stimulus package announced on 30 March last year.

The scheme has undergone a few changes: its initial rate was $1,500 for businesses that could demonstrate a 30 per cent hit to turnover, and was slated to run for only six months.

It’s been extended twice, but the rate has reduced each time, and a ‘tier’ system of two different pay rates introduced for part-time and full-time workers.

The rate is currently $1,000 a fortnight for workers on Tier 1 and $650 a fortnight on Tier 2.

And it’s not too late to register, either; the ATO is actually still encouraging eligible businesses to apply until it winds down for good.

Since the scheme’s inception, the number of people on the payments has dropped from 3.5 million between April and July at the height of the pandemic to around 1.3 million. Treasury expects 1.1 million Aussies will still be reliant on the scheme when it ends.

How many people will lose their jobs when JobKeeper ends?

No one can know this figure for sure, but experts generally agree that the figure is lower than first expected.

The key thing to know here is that the nation’s economic recovery is faring notably better than forecasters first anticipated.

Australian GDP rebounded by 3.3 per cent in the September quarter, the latest GDP figures show. The Commonwealth Bank also predicts Australian GDP will grow by a further 4.2 per cent this year, and 3.8 per cent in 2022.

CBA head of Australian economics Gareth Aird said the economic recovery would exceed expectations.

“Provided transmission of COVID-19 in Australia remains low, particularly community transmission, the strength of the economic recovery in 2021 will surprise many,” he said.

Echoing this, Sydney consultancy EQ Economics managing director Warren Hogan described economic activity and employment as “extraordinarily strong” in the second half of 2020.

“Recent economic outcomes are better than anyone expected just four months ago – a true remarkable turnaround,” he said.

Stimulus and policies from federal and state governments, as well as monetary policy from the Reserve Bank of Australia, are doing its job and keeping money flowing, he added.

“Confidence is back to a reasonable level even if it is still somewhat cautious. The housing market is roaring back to life.

“The end of Jobkeeper is unlikely to have a meaningful impact on the recovery.”

Hogan doesn’t expect job losses to clock up beyond 100,000 people, and said it could even be “as low as 10,000”.

Estimates from the Treasury also sit around the 100,000 figure. Speaking to a Senate committee last month, Treasury secretary Steven Kennedy said the end of JobKeeper would result in thousands of job losses.

There would be a “small proportion” of the 1.3 million people on JobSeeker that would be working “zero or low hours” by the scheme’s end, Kennedy said.

“That could be of the order of 100,000 people, which was roughly the number of people at the end of JobKeeper 1 … who were on zero or low hours and who moved to other employment [or] moved away from those firms.”

AMP Capital chief economist Shane Oliver expects job losses below this figure.

“There will still be some [job losses], such as jobs dependent on international travel and foreign students but it's likely to be far less than 100,000,” he told Yahoo Finance.

Will unemployment shoot up?

Despite the job losses, the unemployment figure – currently at 6.4 per cent – isn’t actually expected to tick up by very much.

“Unemployment is unlikely to spike and given the recovery we have seen so far could well come down further over the first half of 2021,” said Hogan.

Oliver added that unemployment numbers didn’t jitter in October when the number of JobKeeper-protected jobs fell by 2.1 million.

“it’s doubtful there will be a big rise in April either if JobKeeper ends as scheduled providing the economy continues to recover.”

Will there be a ‘fiscal cliff’?

In light of the stronger economy fears of a ‘fiscal cliff’, referring to an impending withdrawal of government support and a looming drop in spending, are looking a little overblown, according to the economic experts.

Treasurer Josh Frydenberg himself has said the scheme is ending because individuals and businesses across Australia – which collectively saved more than $200 billion during the pandemic – should be able to support themselves.

“This money will help underpin our economic recovery and avoid a fiscal cliff as some of the support measures start to taper off,” he said in mid-January.

Oliver says that Australians will be supported by tax cuts, announced in the 2019 Federal Budget, and noted that JobKeeper had been phased down over several months.

“The fiscal cliff has turned into a fiscal slope, and as long as the recovery continues, the wind down in stimulus won’t be a major problem for the economy.”

However, Hogan warned “we may see some mortgage defaults”.

“But these look to be contained at this stage. This isn’t related to the end of JobKeeper as such but the end of the loan deferral program,” he added.

“While the number of loans in deferral has declined by more than 80 per cent since the high point in mid 2020, there are still $43 billion of mortgages in deferral. Some of these will default.

“This is terrible for the people involved, but is unlikely to undermine the strong recovery in housing happening right now.”

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