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To keep or not to keep JobKeeper

"Never ask a barber if you need a haircut," Warren Buffett once famously advised. The barber's nod will invariably be met with opposition from shampoo manufacturers.

Such is the divide between the Morrison government (the barber) and labour unions and Labor (shampoo makers) with regards to the JobKeeper scheme, which is set to end on March 28.

The "shampoo-ers" argue that withdrawing JobKeeper "prematurely" would cause the country's unemployment to spike.

Australian Federal Treasurer Josh Frydenberg has already ruled out the possibility of extending the government's "JobKeeper" scheme beyond the end of March this year.

Recent stats support Frydenberg's decision.

The Australian Bureau of Statistics' (ABS) reported that 50,000 workers found employment in December - in line with market expectations. Though the monthly addition in jobs has slowed from 180,000 in October and 90,000 in November, it remains a great feat when placed in the context of the resurgence in domestic and overseas coronavirus infections over the month and the Morrison government's scaling back of its JobKeeper subsidy payments three months earlier.

The latest employment number has reduced the total jobs lost this year from more than 922,000 to a little less than 64,000 - a 93% improvement. Further, the annual rate of decline in total employment has eased to 0.5% in December from 0.6% in the previous month and the peak 5.7% year-on-year rate of contraction in jobs recorded in May 2020.

Even better, there were strong gains in both full-time and part-time employment in December. Full-time employment increased by 35,700 workers while part-time hires grew by 14,300.

Better than even better is the decline in the unemployment rate to 6.6% in December from 6.8% in the previous month and this comes despite the 0.1 point increase in the participation rate to 66.2% -- indicating jobseekers' confidence over their job prospects.

This compares with the 8.0% unemployment rate the RBA forecast for end-year 2020 and lower than the Treasury's already lowered MYEFO (Mid-Year Economic and Financial Outlook) prediction for the jobless rate to "peak at 71/2 per cent in the March quarter 2021".

Because of this, consumers and businesses are growing more confident. The Westpac-Melbourne Institute index of consumer sentiment increased by 1.9% in February from 107.0 in January. Confident consumers - with more money, more savings and more wealth - owing to rising share and property prices -- are spending consumers that, in turn, lifts business confidence. The NAB business confidence index jumped by five percentage points to a reading of +10 in January - above its long-run average of +6 and despite lower than the +13 recorded in November last year, remains the highest in three years.

Improved consumer and business confidence would set off a virtuous cycle of increased household spending, higher corporate profits, lifting business confidence, raising employment, buoying consumer confidence...

Further, the Australian Financial Review (AFR) reports that: "More than 2.1 million workers have left the JobKeeper wage assistance scheme, which Treasurer Josh Frydenberg said showed growing strength in Australia's economic recovery from COVID-19."

"New Tax Office figures showed 1.54 million workers remained on JobKeeper at the end of 2020 - down from 3.6 million in September 2020 - while about 520,000 companies have stopped receiving the payments as their trade recovers."

Even Reserve Bank of Australia boss Philip Lowe has given his nod to not keeping JobKeeper: "Given the recovery of the economy, I can understand why the government wants to stop that program."

Whaddyathink?

Read our full COVID-19 news coverage and analysis here.

Read more: JobKeeperJosh FrydenbergPhilip LoweAustralian Bureau of StatisticsMYEFO Mid-Year EconomicNABTreasuryWarren BuffettWestpac-Melbourne Institute
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