Government support for business, December quarter 2020

Released
3/03/2021

The Government’s economic response to the COVID-19 pandemic continued into the December quarter 2020. This response included the continuation of JobKeeper and Boosting cash flow for employers subsidies. JobKeeper and Boosting cash flow for employers are the largest subsidies recorded in the history of the national accounts. For further information on the classification of these policies, see Economic measurement during COVID-19: Selected issues in the economic accounts.

JobKeeper payments accounted for $11.9 billion in December quarter, down from $35.8 billion in the September quarter. Boosting cash flow for employers contributed $6.7 billion, down from $13.5 billion in the September quarter. Other COVID-19 related subsidies, including those made by state governments, added an additional $3.7 billion in the December quarter.

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Changes to JobKeeper

The JobKeeper policy was extended from 28 September 2020 with new employer eligibility tests and a two-tiered payment system.  

Eligibility for the JobKeeper extension was assessed on the change in turnover from September quarter 2019 to September quarter 2020.  This eligibility criterion differed from the original JobKeeper employer eligibility test which was based on expected performance as opposed to past performance.

Large businesses (turnover of $1b or more) were required to show a 50% decline in turnover, small to medium businesses (turnover less than $1b) were required to show a 30% decline and Australian Charities and Not-for-profits Commission registered charities required to show a 15% decline.

Compared to the original JobKeeper payment of $1500 per fortnight, the two-tiered payment system introduced payments of $1200 per fortnight for eligible employees working 80 hours or more (tier 1) while all other eligible employees received $750 per fortnight (tier 2).

Both new employer eligibility rules and the lower rate of Jobkeeper payments contributed to the overall fall in total payments.

JobKeeper payments by industry

In the December quarter, the largest portion of JobKeeper payments remained distributed to large employing industries such as Construction, Professional, Scientific and Technical Services, and Accommodation and Food Services.

JobKeeper payments relative to compensation of employees (COE) were highest in Arts and Recreation Services (25.0%), down from 51.3% in the September quarter. Accommodation and Food Services (16.6%) recorded the second-highest share of JobKeeper relative to COE, down from 45.0% in the September quarter.

The falls in relative shares reflect the decline in JobKeeper payments and increased economic activity. The JobKeeper payments fell with the introduction of new eligibility rules and lower payment rates. The easing of COVID-19 containment measures led to increased economic activity, growth in employment and hours worked.

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Of total JobKeeper, 86.6% were tier 1 and 13.4% were tier 2 payments. Industries with the highest composition of casual and part-time workers received the lowest proportion of tier 1 payments. These industries included Arts and Recreation Services, Education and Training, Accommodation and Food Services, and Retail Trade.

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JobKeeper by state

Victoria recorded the highest level of JobKeeper relative to COE of all states and territories (7.9%) as the most stringent restrictions were eased in late October and eligibility for payments remained higher than in other states. For Australia excluding Victoria, JobKeeper relative to COE was 3.9% in the December quarter, down from 13.7% in the September quarter.

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Boosting cash flow for employers by industry

In addition to JobKeeper, the Government continued to support small and medium-sized businesses and not-for-profit employers with the Boosting cash flow for employers policy.

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Industries with a high shares of small and medium-sized businesses received the largest portion of Boosting cash flow for employers payments. These industries included Administrative and Support Services, Healthcare and Social Assistance, and Other Services.

Boosting cash flow for employers relative to operating surplus was highest in the Administrative and Support Services (15.2%), Accommodation and Food Services (11.9%), and Other Services (19.4%) industries.

For the Health Care and Social Assistance industry, boosting cash flow for employers relative to operating surplus was 10.4%, down from 20.9% in the September quarter, reflecting recovery in this industry with easing of COVID-19 related restrictions and high demand for these services.

Taxes less subsidies on production and imports

Taxes less subsidies on production and imports rose 727.5%, following falls in both the June and September quarters 2020. Taxes on production and imports rose 2.9%, driven by goods and services tax (4.6%), taxes on financial and capital transactions (11.3%) and taxes on gambling (30.0%). Subsidies on production and imports fell from the record high levels driven by falls in JobKeeper and Boosting cash flow for employers.

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