Andrew Leigh

BILLIONAIREKEEPER: THE GROSS MISMANAGEMENT OF JOBKEEPER IN THE PANDEMIC

The Canberra Times, March 29 2021

A pair, a twin, a double. The number two has been dubbed by mathematicians ‘the oddest prime’. It’s a quirky number, and it’s the only number you need to understand some really odd things that have been happening in the economy lately.

Let’s start with billionaires. According to Bloomberg’s Billionaire Index, Australia’s billionaires have had a remarkable twelve months. Since COVID hit, the typical Aussie billionaire has seen his or her wealth almost double. That’s right - double. If you’re an Australian billionaire who started the pandemic with $1 billion, you’re now most of the way to $2 billion. 

Some have been coy about this, others less so. A year ago, Gerry Harvey told 60 Minutes ‘Why are we so scared about getting this virus? There’s nothing to be scared of.’ Harvey Norman’s air purifier sales had doubled, he said, while freezer sales were up fourfold. ‘We've got enough sales people, enough customers and we're doing really good business’. By the end of the year, 1.8 million had died from COVID, and Harvey Norman had enjoyed its most profitable year ever.

But while billionaires have seen their wealth double, workers have seen their share of national income dip below half for the first time in 1959. In the middle of last year, the Australian Bureau of Statistics reported that company profits had jumped by 14.9 percent, while workers’ total wage and salary bill fell by 2.5 percent. 

Not since the days of Errol Flynn have Australian workers earned less than half of all national income. 

Now, you might have thought that this was just a consequence of capitalism, or a result of the recession. Indeed, it’s certainly true that downturns tend to hurt workers more than investors, and that lower-skilled workers are the most likely to be fired.

But that’s not the whole story, because we now know that the Morrison Government’s mismanagement of the JobKeeper scheme has helped enrich some of the richest Australians. 

JobKeeper was an important initiative, but it has emerged that at least 11 Australian billionaires are significant shareholders in firms that received JobKeeper and used it to pay dividends. What social media used to call #DividendKeeper is now being dubbed #BillionaireKeeper.

Now a new report from Ownership Matters reveals that among listed companies that received JobKeeper, one dollar in five went to firms whose underlying earnings rose.

This means that these firms weren’t just profitable in 2020 - they were more profitable than they had been over the same period in 2019. And yet they received JobKeeper taxpayer support. 

Profitable firms are to be celebrated - but there’s no reason they should be subsidised. 

Indeed, you might ask how they got JobKeeper in the first place. One possibility is that they became eligible under a rule that allowed businesses to forecast that their revenues would fall, but then didn’t actually experience a downturn. For example, a billion-dollar business might have forecast that its revenue would fall by more than 50 percent, but never suffered such a slump. In the process, it might have gotten millions of dollars from the taxpayer.

A hundred million here, a hundred million there, and soon we’re talking real money. Companies who got JobKeeper despite increasing profits include Premier Investments, Accent Group, car dealer AP Eagers, investment bank Moelis and hedge fund K2. Funny, when we debated the JobKeeper bill in parliament, I don’t remember Scott Morrison boasting about how it would benefit investment banks and hedge funds. 

Labor has attempted to find out how much money went to firms whose profits grew. Unsurprisingly, the Coalition won’t answer. But if the Ownership Matters results hold across the entire program, it suggests that $10 to $20 billion may have been given to businesses whose profits went up rather than down. That’s wastage on an unprecedented scale - more than $500 for every man, woman and child in Australia. If JobKeeper had been better targeted, there would have been more money now to support sectors such as travel, hospitality and the arts, where job losses now loom.

Which brings us to the final way that the number two matters. Over its year of operation, JobKeeper cost $83 billion, and saved 700,000 jobs, most of them for six months. That equates to $118,000 per job – almost twice the average wage (including full-timers and part-timers) of $66,000. Given that the Coalition railed against Labor’s Global Financial Crisis stimulus on the basis that the cost per job was too high, it’s striking now to see how expensive JobKeeper turned out to be.

The thing is, it didn’t have to be this way. Australia was right to implement JobKeeper when the pandemic hit. But other countries with similar programs applied much stricter rules to ensure the money went where it was most needed. Every few weeks, New Zealand firms had to prove that their sales were down by at least 40 percent. No downturn, no government subsidy. In Denmark, government support was conditional on businesses not paying executive bonuses or shareholder dividends.

In the past year, the wealth of billionaires doubled, while the income share of workers fell below half for the first time since the 1950s. And because the Morrison Government recklessly sprayed cash on profitable firms, the cost per job was twice the average wage. It isn’t just odd, it’s downright offensive.

ENDS

Authorised by Paul Erickson, ALP, Canberra