Business whispers: how Treasurer Josh Frydenberg squandered $40bn on JobKeeper

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Treasury, Treasurer Josh Frydenberg

It turns out the very business lobbyists who stood to benefit most from JobKeeper were regularly advising the Government on JobKeeper. Callum Foote and Michael West report how $40bn was squandered and the role of corporate spinners Business Council of Australia and AI Group.

It turns out that the foxes were advising the farmer on the henhouse; and when the henhouse broke, it appears they advised the farmer not to fix it. The result was Treasurer Josh Frydenberg squandered $40 billion in the biggest transfer of wealth yet from Australian taxpayers to large corporations in history. 

Documents filed this week show the Federal Treasury knew its JobKeeper scheme was being rorted three months into the Pandemic yet, counselled by big business lobbyists in regular fortnightly meetings, they allowed the rorts to continue. 

From Treasury’s response to Questions on Notice:

“Since the start of the pandemic, the Treasury has engaged regularly with business to understand the impact of the pandemic and to inform the Government’s policy making. This includes fortnightly meetings with the business peaks, and regular meetings with other key business representatives”.

Michael West Media has called around the business lobby groups to ask them about their advice but none have yet proffered a meaningful response.

There were three key flaws in the scheme, flaws which led to a record bonanza in corporate profits, payouts to shareholders, both offshore and domestic, and executive bonuses:

  • There was no “clawback” mechanism in JobKeeper which ensured subsidies would be paid back by those rorting it,
  • Subsidiaries of multinational companies were allowed to claim it,
  • The list of JobKeeper recipients was kept a secret from the start, and remains a secret, in contrast to similar corporate welfare schemes in New Zealand, the US and elsewhere.

Despite calls by the Greens, independents in Parliament led by Rex Patrick, and Labor led by Andrew Leigh, the Coalition remains staunchly in favour of secrecy; as do the lobby groups Business Council of Australia and AI Group, who advocated that the design flaws not be fixed, even when Treasury became aware the scheme was being rorted from pillar to post.

The conflicts of interest are staggering. It is now Australian corporate folklore that billionaire ragtrader Solly Lew broke down in tears when begging Josh Frydenberg to intervene and prop up businesses early in the Pandemic.

Yet, unlike Lew, the BCA and AI endlessly parade in the press their “policy leadership”, their research purpose to create a “better Australia”.

Led by the ubiquitous Jennifer Westacott, the BCA is the nation’s most powerful business lobby but, paradoxically, the majority of its 140 members control the largest companies in the world operating in Australia. The majority of its members are either entirely or majority controlled by foreign shareholders.

This perhaps explains why the subsidiaries of profitable multinational corporations were permitted to claim JobKeeper.

AI Group, led by the ubiquitous Innes Willox, has an even greater conflict of interest. Not only is it funded by Federal Government contracts (and foreign weapons manufacturers), AI itself claimed JobKeeper subsidies even though it failed to meet the revenue tests.

Although AI is effectively paid by the government to lobby to government, although its modest revenue decline of 6% in 2020 was due to one of its government contracts coming to and end, it took $4m in JobKeeper in 2020 and has refused to pay it back. Its lavishly paid executive group took a mere 1% haircut on their $5m pay.

In many instances, JobKeeper was critical to keep the economy ticking over, as the government and these business PR groups continue to argue. The $90 billion scheme did keep companies in touch with their employees. 

Along with the explosion of more than $300 billion in new money created by the Reserve Bank buying bonds from the major banks, the government’s raft of subsidies did keep money flowing through the economy.

And it should be said that in late March and early April last year at the height of Covid fears, the sheer uncertainty called for drastic and rapid action; so mistakes would inevitably have been made. The rub is though that Josh Frydenberg knew by June, just three months into the Pandemic that there were gaping flaws in JobKeeper, yet advised by these business lobbyists, they did little to address them.

The other business lobby in attendance at the fortnightly meetings with the Treasury was COSBOA, which advocates for small business. COSBOA also declined to comment for this story in a significant way, and it appears to have supported the scheme flaws. 

However, small businesses have nothing like the financial muscle of large corporations to withstand a harsh downturn, lockdowns. They don’t enjoy the same access to capital.

According to Questions on Notice provided by Treasury this week, by June, they knew that 15% of the JobKeeper payments were going straight to the bottom line of companies which did not meet the test for falling revenue.

Treasury has conceded these fortnightly meetings influenced their decision not to retest turnover rates or institute a clawback mechanism despite knowing that 15% of the funds had already gone to profitable businesses.

This adds fuel to speculation as to why Treasury’s advice was not to retest the turnover of JobKeeper recipients after three months instead of six. Analysis by the AFR suggests that to do so would have saved $20 billion.

What about a clawback?

Treasury has declined to confirm whether the Treasurer himself rejected a recommendation for a clawback mechanism in the initial draft of the JobKeeper scheme.

In Parliamentary hearings, Jenny Wilkenson Deputy Secretary, Fiscal Group at the Department of Treasury was quick to point out that Treasury did not recommend a clawback in its three-month review.

That is, it did not recommend a clawback mechanism after its regular consultation with business lobbyists in the first three months.

A Bill introduced by Greens Senator Nick McKim was proposed to claw back JobKeeper payments made to companies whose annual turnover was more than $50 million and either made a profit, paid a dividend to shareholders or paid a bonus to its executives.

Independent senator Rex Patrick, who supports the Greens clawback legislation, said that the six-month report was “written by public servants whose duty is to serve the public, but who have worked for the benefit of the government”.

Senator Patrick also questioned the Treasury’s analysis – and claims by the corporate lobbyists that a clawback would have reduced the effectiveness of the scheme, asking “what company facing the uncertainty of the pandemic would have turned down Jobkeeper payments under the conditions that they may have been required to pay it back at some point?”

Labor has closed ranks with the Coalition, rejecting the idea of a clawback despite it being now known that almost $40 billion was given to profitable businesses. That leaves clawback dead, the only remedy to retrieve the billions granted to those which did not deserve it as … shame.

Once revered for its independence and the intellectual rigor of its work, now Australia’s Federal Treasury seems but a lapdog for the business lobby.





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