The government’s JobKeeper scheme may need to be extended past its September expiry date, the Reserve Bank of Australia governor, Philip Lowe, has warned.
Lowe told the Senate Select Committee on Covid-19 that the Australian economy would hit a “critical point” in September when stimulus measures expired, and sounded the alarm on withdrawing those measures prematurely, and if the workforce still required them.
"It's clearly going to be a critical point when that scheme [JobKeeper] comes to an end and also when the deferral for six months of mortgage payments and other payments that the banks are offering … so that's a critical point for the economy," Lowe said.
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“If we have not come out of the current trough in economic activity, there will be, and there should be, a debate about how the JobKeeper program transitions into something else, whether it's extended for specific industries, or somehow tapered,” Lowe said.
Lowe said the government’s decision to review the JobKeeper scheme at the three-month mark was “sensible”.
"It will be important to review the parameters of that scheme. It may be in six months' time we bounce back well and the economy is doing reasonably well, and these schemes, which were temporary in nature, can be withdrawn without problems,” Lowe said.
"But if the economy is not recovered reasonably well by then, as part of that review we should be looking at, perhaps, the extension of that scheme or the modification in some way.”
He said, however, it was too early to tell whether an extension would be necessary as the outlook of the economy was “very uncertain”.
The RBA governor also said the emergency interest rate cut implemented in March was likely here to stay.
"We're not going to be raising interest rates until full employment is in, and we're sustainably within the 2-3 per cent target range [for inflation]," he said.
"I think it's reasonable to expect that that will not be for some years."
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Lowe’s warning follows the Prime Minister’s announcement that JobKeeper is unlikely to be extended past September as the government seeks to prop up the economy with more trained workers through its JobMaker program.
“At a now anticipated cost of more than $150 billion in just six months, all borrowed against future tax revenue, these supports [JobKeeper, JobSeeker] can of course only be temporary,” Scott Morrison said.
“At some point you’ve got to get your economy out of ICU. You’ve got to get it off the medication before it becomes too accustomed to it.”
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