Review finds JobKeeper wage subsidy program effective and stabilising for economy in extraordinary crisis

The pandemic-era JobKeeper program was effective and stabilised the Australian economy in a extraordinary crisis, an official review has found.

The program, which supported about four million employees during March 2020 and March 2021, “laid the foundation for a speedy recovery”, the Treasury-commissioned review by former deputy Treasury secretary Nigel Ray concluded in its findings, released on Friday.

The subsidy allowed bosses to keep paying staff when they could not operate because of restrictions to prevent the spread of coronavirus in its initial stages.

JobKeeper also reduced the risk of labour scarring by maintaining employee-employer relationships and providing stimulus to the economy that helped the labour market recover faster and stronger than it otherwise would have from the depths of the initial pandemic shock, the review found.

The program in its initial phase was expensive but valuable in keeping highly productive but financially constrained companies productive. In contrast, the review found, extensions were a drag on productivity growth and supported less productive firms.

“Overall, JobKeeper provided value for money through its broad social benefits and the role it played in addressing extraordinary and unquantifiable uncertainty and averting the worst economic tail risks of the pandemic,” the report states.

The program overall was speedy and well-managed, and incidents of fraud were low.

Amid the findings of widespread efficacy, the report also made improvement recommendations should a similar scheme be needed in future.

These included being designed to adapt more quickly to changes in conditions, which would mean costs could be cut without efficacy being compromised. JobKeeper could also have been introduced earlier — more than two weeks after the first restrictions were announced.

The review also recommended tiered payments, proportionate to earnings, rather than flat payments, as well as greater transparency, including a public register.

Its final recommendation was that though JobSeeker was justified during the pandemic, it was designed for an extraordinary situation and should be considered only when external and temporary shocks erupt that have the potential to have substantial implications for the entire economy.