The $60 billion JobKeeper overestimation was the result of errors in enrolment forms aligning with early estimates of the program’s take-up and cost, according to Treasury secretary Steven Kennedy.
Kennedy on Tuesday told the Senate select committee on COVID-19 he would take the blame for the Treasury’s and the Australian Taxation Office’s failure to detect the mistake earlier on.
“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.
The departments last month revealed the wage subsidy scheme would cost $70b rather than $130b, covering 3.5 million people rather than the forecast 6.5m.
Kennedy told the senate inquiry that at the time the policy design and costing analysis for JobKeeper was being undertaken, the health and economic impacts of COVID-19 were “highly uncertain”.
On March 27, the department briefed Treasurer Josh Frydenberg on two economic scenarios, the first assuming that restrictions would be in place for six months, during which 2.1m fewer people would be working.
The second scenario prepared for tighter restrictions to be in place for eight weeks, with around 4.8m fewer people working during that time, before reverting to lighter restrictions for another four months.
Kennedy said it was “judged prudent” to cost JobKeeper using the worst-case scenario. Two methods were used to cost the program, both of which estimated a total cost of $130b to support 6.5m workers.
Despite the economic outlook being better than expected by the time JobKeeper opened for enrolment on April 20, the reported enrolments data from the ATO “tracked steadily towards the original costings estimate”, Kennedy noted.
“Treasury considered that this could reflect variations in distributional impacts of the shock across firms, a higher proportion of firms than we had expected being able to demonstrate their eligibility, or the shock being more significant than other real time indicators were implying,” he said.
Eventually the ATO realised there was a “mis‑reporting error”, and informed Treasury on May 21 — the day before the mistake was publicly announced.
The departments found errors in just 0.1% of enrolment forms, which ATO boss Chris Jordan said came down to employers putting down “the amount payable to rather than the number of employees”.
Kennedy admitted that closer analysis of the employee data should have been undertaken.
“However, given that the information that was being collected from these forms was lining up with earlier estimates of take-up under the program, and given that payments made under the program are not based on enrolment data, it was decided that resources should instead focus on the payments being made under the program,” he said.
Jordan asserted that “no overpayments or underpayments occurred as a result of this issue”. He said that by June 4, the ATO had delivered $12.96b in JobKeeper payments to 872,482 businesses, covering roughly 3.3m workers.