When COVID-19 lockdowns hit, the Australian federal government responded with a raft of support measures for people whose income otherwise would have been slashed. In particular, it increased regular JobSeeker payments to the unemployed and offered the JobKeeper subsidy to employers suffering a 30 per cent or greater decline in revenue but which kept staff on.

These measures were initially available until the end of September 2020, and were described by government as a “bridge” to the other side of the pandemic. Although COVID-19 has so far been well controlled in much of Australia, its economic consequences are ongoing – and the government has responded by prolonging support measures.

JobKeeper and JobSeeker have been extended, albeit in somewhat mitigated form, until the end of Q1 2021. Economists say this was always a more likely outcome than an immediate withdrawal at the earliest opportunity.

“We were never overly concerned about the supposed fiscal cliff at the end of September,” says Gareth Aird, head of Australian economics at Commonwealth Bank of Australia. “We always thought it was more likely than not that the government would extend the COVID-19 income supplements – JobKeeper and JobSeeker – if needed, as indeed it did.”

Aird points to one of the more embarrassing moments the federal government has experienced in the crisis – the miscosting of the initial phase of JobKeeper by A$60 billion (US$43.7 billion) as evidence the government was always prepared to provide a larger volume of fiscal support if required.

Aird continues: “‘Relaxed’ is probably the wrong word but we are taking some comfort from the fact the government is committed to keeping the fiscal tap running if need be. We expect it to take more of a tapering approach, of withdrawing stimulus at a rate commensurate with economic improvement. The idea is to have a handover effect from government support back to private demand, in a staged process that avoids income shocks.”

This may be just as well, as there is little sign the economy is ready to survive without government stimulus.

Bill Evans, Westpac Banking Corporation’s chief economist, tells KangaNews: “We expect the ongoing use of JobKeeper to be a lot greater than the government expects. It is forecasting renewal at the end of September to be 1.4 million – down from 3.4 million. We expect there will be 1 million users in Victoria alone, as businesses around the country – in particular in New South Wales – continue to be affected by social-distancing restrictions.”