The government should allow businesses to take out revenue-contingent loans to help them transition out of the JobKeeper wage subsidy scheme, according to leading economists.
At a price tag of $130 billion, the wage subsidy program has been the big ticket item of the government's response to the economic impacts of coronavirus, but experts are warning that if the program was to end suddenly, it would only delay the closure of businesses and loss of thousands of jobs.
More than 835,000 businesses and 5.5 million workers are enrolled in the program, which pays businesses a $1500 fortnightly subsidy for each eligible employee if revenue has dropped by 30 per cent.
Under the current legislation the program will be in place until late September, but there are concerns that many businesses will not be financially stable by then to survive without the payment.
Economists Bruce Chapman at the Australian National University and John Piggott at the University of New South Wales have called for businesses to be allowed to transition out of the scheme by using revenue-contingent loans, similar to the HECS loans taken out by university students. The loan system would also prevent the government taking on even more debt.
"For many organisations, without a buffer of this type, the withdrawal of JobKeeper could be very harsh, and might mean increased job shedding, further demand reductions, and heightened uncertainty at a time when insecurity is already at a historic high," Professor Chapman said.
Economists and commentators are concerned that a transition away from the JobKeeper scheme must strike the balance between avoiding unnecessary economic pain without endlessly subsiding businesses that won't ever become viable.
"Our results imply that a sensibly-based RCL design, in combination with a reduction of the grants-based component of JobKeeper to around 15 per cent of the original policy, are able to deliver the same level of initial financial support to businesses in a three-month period," Professor Chapman said.
"For example, with the suggested settings, a firm with two employees and a pre-COVID-19-crisis annual revenue of $150,000 would incur a debt of $13,000. When annual revenue regains its pre-crisis level, five per cent of this has the debt paid off in less than two years."
JobKeeper has been welcomed by business, but its introduction has not been without teething issues.
There has been 265 complaints to the Fair Work Commission about the temporary changes to industrial relations laws that accompanied the scheme, including ability to make changes to hours and duties and direct staff to take annual leave.
However Industrial Relations Minister Christian Porter said the number was remarkably small, considering how many people were in the system.
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