ASX shares are on watch today as the government again considers ending jobkeeper for businesses that have recovered.
What is jobkeeper?
Jobkeeper is a government support system designed to save jobs so that the economy could bounce back quicker when the COVID-19 pandemic passed.
It pays a flat $1,500 fortnight for eligible employees and sole traders.
It was designed to deliver quick support to the economy, even if it created a few strange results like part timers getting a pay increase compared to their pay before.
Jobkeeper has been credited with keeping the unemployment rate a lot lower than it otherwise would have fallen to. It has also probably helped keep parts of the economy going through this difficult time.
What is the government suggesting?
The suggestion is that businesses which have seen a quick recovery shouldn’t keep receiving the subsidy. If a business was eligible at the start of the scheme it will continue to receive the payment even if its turnover was above the qualifying limit of a 30% fall, or 50% if a business had more than $1 billion of revenue.
But now the government is thinking about changing the rules according to reporting by the Australian Financial Review.
There are two key areas of the jobkeeper program under review, which are the issues I’ve already mentioned. Around 1.7 million workers are getting more from jobkeeper than they did from their job prior to COVID-19. The other question is whether businesses should keep receiving the subsidy if it’s not needed — this is the element that is most likely to be changed.
What will this do to ASX shares?
Well, the ASX 200 (ASX: XJO) is currently flat today, but a change to jobkeeper may cause a bit of a negative reaction. Think how hard the ASX jumped when investors realised not as many people were getting jobkeeper as expected.
It’s pure stimulus right now for people and businesses getting jobkeeper, but many would become ineligible if the rules were changed. It would mean more of the wage cost put back onto businesses and perhaps reduced spending by people who just saw it as bonus or free money.
Think how much shares like Wesfarmers (ASX: WES) and JB Hi-Fi (ASX: JBH) have benefited from the scheme’s support of the economy. With so much uncertainty going on at the moment, I prefer to choose businesses that can keep seeing higher demand no matter what happens next, like Bubs (ASX: BUB).
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Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned.
