Finance Minister Mathias Cormann has defended the $60 billion bungle in the cost of the JobKeeper program, saying the cost of the wage subsidy was based on a worst-case scenario that didn't eventuate.
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The government said in mid May that six million Australians were receiving the wage subsidy, expected to cost $130 billion. In fact, 2.9 million people were getting the money, in a program now expected to cost $70 million.
The miscount came from the Australian Tax Office, in an error that came to light on May 22.
Evidence to a Senate inquiry on Tuesday showed the tax office realised as early as May 13 that the numbers weren't adding up. Thinking the problem was that big businesses were yet to finalise their applications, tax officials starting contacting them.
But by May 18, it was clear that employee numbers were well below where they should be. Businesses had told the tax office they had 6.3 million employees when they enrolled, but payments were only being made for 2.75 million employees.
Tax office second commissioner Jeremy Hirschhorn said by May 20, the tax office had discovered part of the miscount and spoken to Treasury, but "at that stage all we could say was that one part of the puzzle had overstated". The data showed 3.3 million workers had wrongly been counted in the scheme. By May 21, the full mistake had been uncovered and Mr Hirschhorn said he had spoken to Treasury again that day.
Treasury Secretary Stephen Kennedy appeared before the Senate inquiry on May 21, where the mistake was not disclosed. But Dr Kennedy said he hadn't been told until 3pm, a little more than an hour after his appearance at the inquiry.
Tax Commissioner Chris Jordan said he found out three hours later, when Mr Hirschhorn had sent him a text message at 6.02pm.
Labor Senator Kristina Keneally questioned why no Treasury officials had given any inkling of doubts or attached any caveat to the numbers provided to the inquiry.
Dr Kennedy said before May 21, Treasury had noticed the difference between the payments being made to workers and the reported number of workers covered, and had been tracking the discrepancy.
"There had been exchanges with the ATO about why the payments were not tracking in line with the reports for the number of employees covered. The payments were tracking lower," he said. "The ATO did undertake some follow up on our behalf."
The JobKeeper mistake was made public on May 22.
The tax office says the JobKeeper counting mistake happened because some businesses filled in the JobKeeper form incorrectly - stating the amount they expected to receive in a field where they were supposed to state the number of employees who would receive the payment.
The tax office has previously said about 1000 firms filled in the form incorrectly, but on Tuesday, Mr Hirschhorn revised the number on Tuesday. In all, 1500 companies had given a "dramatically wrong" number of employees, he said.
Mr Jordan said some had filled in numbers such as their bank account details, ABNs, telephone numbers. Others had filled in the number 1500 (which is the amount of the wage subsidy) or multiples of 1500, rather than the number of workers.
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Senator Cormann said the number of workers expected to receive the wage subsidy had been estimated at a time of high uncertainty and the economic outlook had improved substantially from early expectations.
"We were genuinely planning for the worst," he said.
Dr Kennedy said when the program was being put together, the economy had been expected to fall by up to 25 per cent in the June quarter.
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The coronavirus would not have the economic impact expected, but would still be the single biggest economic shock Australia had faced in living memory. JobKeeper remained the largest single program in fiscal history, he said.
It had been put together while the virus was spreading rapidly in Australia as well as overseas, and a full lockdown was possible.
Unemployment was likely to be about 8 per cent in September, he said, but the number was complicated by the number of people on JobKeeper, some of whom had no hours but weren't counted in the unemployment figures.