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Australia Paid $20 Billion Stimulus to Firms That Didn’t Qualify

Australia Paid $20 Billion Stimulus to Firms That Didn’t Qualify

Australia shelled out A$27 billion ($20 billion) under the government’s signature JobKeeper wage subsidy to firms whose revenue didn’t fall sufficiently to qualify for the program or actually increased during the period, according to a Treasury analysis.

At the height of the pandemic lockdown, about A$11.4 billion was paid in the second quarter of 2020 and A$15.6 billion in the third quarter to businesses that didn’t have a 30% -- or 50% -- decline in sales compared with a year earlier, Treasury said Monday in a report.

Of this, A$4.6 billion went to businesses that had an increase in revenue over the year to the June quarter and A$9.2 billion to businesses with an increase over the year to the September quarter, Treasury said in the report titled “Insights from the First Six Months of JobKeeper.”

Treasurer Josh Frydenberg has been under fire for failing to apply more rigorous testing to JobKeeper and for deciding against trying to recoup some of the cash paid to firms. The A$90 billion initiative, the centerpiece of the government’s response to coronavirus, helped limit the rise in unemployment and the contraction in the economy at the height of last year’s pandemic.

Australia Paid $20 Billion Stimulus to Firms That Didn’t Qualify

The result is an embarrassment for a conservative government that prides itself on fiscal discipline and criticized excess spending by the then-Labor government during the 2008-09 financial crisis.

Treasury noted today that the “vast majority” of payments to firms that increased revenue during the period went to small businesses -- about A$12.1 billion, or 88% of the total.

It said many of these firms had been allowed to use an alternative test to determine their eligibility, as sales relative to a year earlier wasn’t a good indication of Covid’s impact on their operations.

JobKeeper ended in late March of this year.

©2021 Bloomberg L.P.