Dr Kennedy said the original estimates were made in late March when it appeared the Australian economy could contract by almost 25 per cent in the June quarter. Lockdowns similar to those put in place overseas were forecast to result in 4.8 million people not working over a two-month period.
Instead, the spread of coronavirus had been largely contained while economic restrictions were being eased rather than extended.
He said it now appeared unemployment was likely to reach 8 per cent in September, rather than the 10 per cent Treasury was expecting earlier this year. The economy, which Treasurer Josh Frydenberg last week said was in a recession, could be “accelerating” through the second half of the year.
Dr Kennedy said while the economic outcomes were positive, the ultimate responsibility for the overestimation of the single largest stimulus program ever created in Australia rested with him.
“As the secretary of the Treasury I take full responsibility for the revised costing of the JobKeeper program and all matters associated with the advice that Treasury has provided,” he said.
Tax commissioner Chris Jordan said some businesses had responded to a question about numbers of eligible staff with figures that included their bank account details, telephone numbers or ABNs. This had inflated the number of expected recipients, closely in line with the Treasury’s own forecasts.
While confident about the economy’s direction, Dr Kennedy said it appeared young people and women had borne the brunt of the downturn as they were more likely to be employed in the hard-hit accommodation, retail or arts and recreation sectors.
Job advertisements, as measured by ANZ, point to a stabilisation in the jobs market. Ads lifted by 0.5 per cent in May but remain almost 60 per cent down on where they were a year ago.
National Australia Bank’s monthly business survey showed a 25-point improvement in corporate confidence last month while trading conditions lifted by 10 points.
Despite the sharp improvements, both are still down around the level experienced during the global financial crisis, with the services sector the worst affected.
The head of $47 billion retail giant Wesfarmers, Rob Scott, said one way to boost the business sector and the broader economy would be for all levels of government to undertake serious tax reform, including the abolition of payroll tax.
Mr Scott said while programs such as JobKeeper had helped businesses, a larger benefit would flow from a tax package that could encompass axing payroll tax and stamp duty plus lower personal income taxes.
“There is a window of opportunity to consider how we might be able to remove these taxes,” he said. “To have a tax that is levied against jobs just seems to be working against what we’re trying to achieve, which is creating jobs for Australians.”
Dr Kennedy told the Senate committee the budget was taking some of its biggest hits from a collapse in tax revenues, saying there had been “significant falls” in company and personal tax collections.
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Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.
Dominic Powell writes about the retail industry for the Sydney Morning Herald and The Age.