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HECS-Style Loan Scheme For Businesses Could Ease Transition From JobKeeper

A review of the $130 billion JobKeeper scheme in June has raised questions as to whether the federal government intends to keep it running for the entire six months, at a time when some believe it will need to be extended.

Researchers from the Australian National University (ANU) and the University of NSW (UNSW) in Sydney believe they have a solution that will enable the scheme to be phased out as the economy reopens and the recovery takes shape.

They recommend introducing what they describe as a "government-controlled revenue-contingent loan scheme" to ease the transition from JobKeeper.

Like the HECS scheme for students, it would provide financial support and stability for organisations through the recovery period without causing substantial financial disruptions to businesses while not loading the federal budget.

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"It works by having repayments conditioned by future revenue," UNSW's John Piggott said.

"We found with a government-controlled RCL facility in place, which could be easily implemented through the ATO, businesses borrow up to a cap to suit their own needs without worries about repayments."

For example, a firm with two employees and a pre-coronavirus crisis annual revenue of $150,000 would incur a debt of $13,000.

Under the loan scheme, when annual revenue regains its pre-crisis level, five percent of this will have the debt paid off in less than two years.

At the other end of the scale, a firm with pre-crisis annual revenue of $550 million, with 6600 JobKeeper-eligible employees, would accumulate a debt of about $43 million.

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"When revenue has recovered, the annual repayment is around $27 million -- again all obligations are met in less than two years once business is close to normal," Bruce Chapman, ANU professor of economics and architect of the HECS system, said.

"For many organisations, without a buffer of this type, the withdrawal of JobKeeper could be very harsh, and might mean increased job shedding, further demand reductions, and heightened uncertainty at a time when insecurity is already at a historic high."