Australian Government COVID‐19 Business Supports

• Published date: 01 March 2023
• Author: Timothy Watson,Paul Buckingham
• Date: 01 March 2023
• DOI: http://doi.org/10.1111/1467-8462.12504

The Australian Economic Review, vol. 56, no. 1, pp. 124–140 DOI: 10.1111/1467-8462.12504

Australian Government COVID‐19 Business Supports

Timothy Watson and Paul Buckingham*

Abstract

This article documents the considerable

economic support provided to businesses by

the Australian Government in response to the

COVID‐19 pandemic. We find that measures

were associated with higher levels of business

profitability and savings, a strong recovery in

payroll jobs and wages, and mixed effects

with respect to business dynamism. We

formally evaluate the SME Cashflow Boost,

finding costs per job‐year saved in the vicinity

of $72–83,000 ($US51–59,000) over its first

year, implying between 400 and 500,000 job‐

years saved over this period. Combined with

results from previous studies, this suggests

between 1.1 and 1.3 million job‐years were

saved by the SME Cashflow Boost and

JobKeeper Payment over their respective first

years post‐announcement.

JEL CLASSIFICATION

E24; E62; H84; M21

1. Introduction

Perhaps one of the more striking aspects of the

initial economic policy response to the COVID‐

19 pandemic was its business‐centric approach.

This is especially the case given the mantra that

emerged from the earlier experience during the

global financial crisis (GFC) to ‘go hard, go

early, go households’(Rudd 2018). Looking at

the first stimulus package announced on 12

March 2020 (Australian Government 2020a) and

the second on 22 March 2020 (Australian

Government 2020b), around 70 per cent of the

intended spending in each package was aimed at

supporting business. This reflected two main

considerations. First, was the characterisation of

the COVID‐19 shock as a supply shock, whereby

businesses were expected to be closed due to

government restrictions for a period of at least six

months. Given this expectation, the Australian

Government pursued an explicit policy of

‘business hibernation’(Norman 2020), and in

the context of the JobKeeper Payment, a strategy

ofseekingtomaintainemployer–employee

connections during the intervening period.

Another consideration was practical, given con-

cerns that the welfare system alone could not

handle the administrative burden of processing

payments on the scale required by the pandemic.

As during the GFC over a decade earlier,

Australian Taxation Office (ATO) systems were

relied on to help deliver economic support

measures in addition to the welfare system.

Concerns about the scale of the economic support

required during the pandemic also saw an

expanded role for private sector payroll systems

to deliver economic support in the form of the

JobKeeper Payment.

* Watson: Centre for Applied Macroeconomic Analysis,

Crawford School of Public Policy, Australian National

University, Canberra, Australia; Watson and

Buckingham: Department of the Prime Minister and

Cabinet, Canberra, Australia. Corresponding author:

Watson, email <timothy.watson@anu.edu.au>.

The authors are grateful for comments and feedback

received from Jeff Borland, Jonathan Hambur and Nu Nu

Win. We thank David Gruen, Lisa Commens, Laura

Brazier, Sandeep Seneviratne, Josh Briers and Caroline

Blink of the Australian Bureau of Statistics for their

invaluable assistance with respect to data collection. The

usual disclaimer applies.

© 2023 The Authors. The Australian Economic Review publishedby John Wiley & Sons Australia, Ltd on behalf of The University of

Melbourne, MelbourneInstitute: Applied Economic & Social Research, Faculty of Businessand Economics.

This is an open accessarticle under the terms of the Creative CommonsAttribution‐NonCommercial‐NoDerivsLicense, which permits

use and distribution in any medium, provided the original workis properly cited, the use is non‐commercial and no modifications or

adaptations are made.

This article documents the largest and most

notable economic security measures targeting

business introduced by the Australian

Government during the COVID‐19 pandemic.

State and territorygovernments also introduced

a range of complementary business support

measures, many of which were significant in

their own right (see Storen & Corrigan 2020),

although space considerations prevent us from

documenting these measures here. Overall, we

find that Australian Government business

supports most likely contributed to increasing

business profitability and savings resulting in

higher levels of business survival than would

otherwise be expected in the circumstances.

We also undertake the first formal evaluation

of the cost‐effectiveness of the $35 billion

SME Cashflow Boost measure, finding costs

per job‐year saved of between $72 and$83,000

($US51–59,000) over the first year following

the Program's announcement, suggesting be-

tween 400,000 an d 500,000 job‐years were

saved by this measure during this period alone.

When combined with results from previous

studies concerning the JobKeeper Payment

from Bishop & Day (2020) and Watson,

Tervala & Sainsbury (2022), this suggests

around 1.1–1.3 million job‐years saved due to

the SME Cashflow Boost and JobKeeper

Payment combined between March 2020 and

March 2021. Employment multipliers are

towards the middle of the range found in

comparable studies from the pre‐pandemic

period surveyed by Chodorow‐Reich (2019);

although below average multipliers for transfer

payments and public investment during reces-

sions found in the meta‐analysis of Gechert &

Rannenberg (2018).

2. COVID‐19 Business Support Measures

2.1 Wage Subsidies and Adjacent Measures

The SME Cashflow Boost measure was

announced in the Australian Government's

first stimulus package on 12 March 2020, and

significantly expanded in the second package

on 22 March 2020—going from a proposed

$6.7 billion to $31.9 billion, and eventually

totalling around $35.4 billion. This measure

involved the automatic delivery of up to two

tax‐free cash payments of between $10,000

and $50,000 to eligible businesses upon

lodgement of their regular Goods and

Services Tax (GST) Business Activity

Statements (BAS). Eligible businesses were

required to have an aggregate annual turnover

under $50 million (based on actual turnover in

the 2018–19 year, or anticipated turnover in

the 2019–20 year); the minimum payment was

$10,000, including in situations where an

employer had no employees; and payment

amounts extended to the lesser of $50,000 or

income tax payments withheld with respect to

employee salary and wages. Payments were

available in two waves: the initial payment

was available with respect to the March or

June quarter 2020 BAS lodgement periods (or

months within these periods for monthly

lodgers), and potentially an additional pay-

ment corresponding to the June and

September quarter 2020 BAS lodgement

periods respectively (see Treasury (2020b)

for further details). Entitlement to the second

round of payments was determined based on

entitlement to the first round of payments, and

equivalent in amount to the first payment (see

ATO (2020a) for further detail).

This article will not go into significant

detail concerning the JobKeeper Payment as it

is covered extensively in a separate article in

this volume, as well as in Bishop & Day

(2020), Borland & Hunt (2021) and Watson,

Tervala & Sainsbury (2022); however, in

many senses the JobKeeper Payment can be

seen as intending to extend economic support

to larger businesses experiencing significant

financial difficulty due to the pandemic for

whom the SME Cashflow Boost measure

could not adequately support due to its

relatively low payment cap, and exclusion of

businesses with a turnover of $50 million or

more. Together, the SME Cashflow Boost and

JobKeeper Payment were the largest forms of

economic support provided by the Australian

Government to Business during the COVID‐

19 Pandemic (Figure 1).

The JobKeeper Payment ended on 31

March 2021, as did the Coronavirus

Supplement and relaxed eligibility criteria

125Watson and Buckingham: Australian Government COVID‐19 Business Supports

© 2023 The Authors. The Australian Economic Review published by JohnWiley & Sons Australia, Ltd on behalf of The

University of Melbourne, Melbourne Institute:Applied Economic & Social Research, Facultyof Business and Economics.