Australian government faces calls to force booming firms to repay Covid-19 handouts

Australia's JobKeeper scheme is credited with saving hundreds of thousands of jobs, but the rush to roll out the programme meant some businesses pocketed money they did not need.
Australia's JobKeeper scheme is credited with saving hundreds of thousands of jobs, but the rush to roll out the programme meant some businesses pocketed money they did not need. PHOTO: AFP

SYDNEY - When the pandemic took hold last year and threatened to destroy the economy, Australia's solution was an innovative A$90 billion (S$88 billion) scheme which gave money to employers to keep their staff employed.

The scheme, called JobKeeper, was, at first glance at least, a stunning success. It is believed to have saved 700,000 jobs and avoided a surge in unemployment. About 3.8 million workers at about one million businesses benefited from the scheme.

The early days of the lockout caused unemployment to increase to a peak of 7.4 per cent in July last year, but the jobless rate has since fallen to 4.5 per cent, which is lower than the pre-pandemic level of 5.1 per cent.

But the rush to roll out the scheme, and the faster-than-expected recovery, meant that businesses across the country have pocketed vast sums from handouts which they did not need or were not entitled to. Some companies received millions of dollars, but later reported massive profits, or paid big shareholder dividends or generous bonuses to executives.

During the first six months of the programme, almost 200,000 businesses that received JobKeeper payments reportedly increased their revenue.

The federal government of Prime Minister Scott Morrison is now under growing pressure to require businesses to return their handouts and also to provide more public information about who received funds.

A recent opinion survey published in The Sydney Morning Herald found that 71 per cent of Australians support companies being forced to repay JobKeeper funds if they did not need it. Another 21 per cent were opposed, with the remainder undecided. The survey also found 68 per cent of Australians want the government to reveal the top 10,000 companies that received funds and the amount they received, with 8 per cent opposed and the remainder uncommitted.

The opposition Labor party has described the scheme as the biggest waste of taxpayer money in Australian history. It says the scheme was "a good idea, badly implemented" and has called on the ruling Liberal-National coalition to ask undeserving companies to repay the money.

"JobKeeper was a necessary scheme and it saved jobs, but the problem is… that too much of it went to firms with rising revenues," Labor MP Andrew Leigh told Sky News last week.

"We're not going to be demanding repayment, but the government should at least be asking the question of these firms as to whether they will do the right thing by their corporate social responsibility."

Before the pandemic, Australia had enjoyed a world-beating 28 years of consecutive growth, fuelled by China's surging demand for its resources. The pandemic initially plunged Australia into a recession, but the economy has since rebounded, spurred by record low interest rates and massive government handouts that have boosted spending and consumer confidence.

Australia's JobKeeper scheme gave firms whose profits were affected by the lockdown A$750 a week per employee, which they paid as wages to their staff. To qualify, businesses had to show or predict declines of at least 30 per cent in their turnover. But many businesses overstated their projected declines, meaning they effectively received government handouts for losses that were never incurred.

An estimated A$6.2 billion went to firms that either increased revenue or had only small losses in turnover during the six months to the end of September last year, when the government began making it harder to access the scheme.

The government has defended the scheme, saying the country was facing "economic Armageddon" and had no choice but to quickly dispatch funds.

Treasurer Josh Frydenberg said the scheme was well targeted and assisted businesses that desperately needed the wage subsidies. He has argued against disclosing the recipients of the funds, saying that it was unfair to firms which had provided their business information in confidence.

"If they were going to have to pay back that money, then they wouldn't necessarily have taken it in the first place and you would have seen jobs being lost," he told ABC News.

Following growing public concerns, some companies have agreed to repay some or all of their subsidies, albeit largely reluctantly.