The Morrison government's much boasted-about $320 billion stimulus package to steer the economy through the coronavirus pandemic just got that much smaller, raising questions about the strength of the economic rebound.
The government admitted on Friday its JobKeeper program will now be $70 billion rather than $130 billion after a $60 billion 'reporting error'.
The wage subsidy to help business keep workers on their books during the crisis will now cover 3.5 million people rather than 6.5 million.
AMP Capital chief economist Shane Oliver said it means the fiscal stimulus will be three per cent of GDP less than originally announced.
"(It) could mean a less robust recovery than had been expected on the basis of that stimulus," he said in a note to clients on Saturday.
"However, the ideal response would be for the $60 billion saving to be used to relax some of the criteria to access JobKeeper and to extend it for those who need it."
But that doesn't seem likely at this stage.
Treasurer Josh Frydenberg says the unintentional reporting error "is not an invitation to spend more money".
Liberal backbencher Julian Leeser agreed that this is all borrowed money.
"Paying back $130 billion will be very difficult, paying back $70 billion will be very difficult and take a long time," he told ABC television.
But he said the JobKeeper payments will be under review at the end of June.
Even so, Dr Oliver says the fewer claims for JobKeeper could indicate that the economy may not be as weak as first feared
"The estimate that it was covering more than six million workers always seemed a bit over the top as that's nearly half the workforce," he said.
But Mr Frydenberg is sticking with Treasury's forecast that the unemployment rate will hit 10 per cent in the June quarter. It jumped to a five-year high of 6.2 per cent from 5.2 per cent in April.
Shadow treasurer Jim Chalmers, who only heard about the massive JobKeeper bungle from Treasury secretary Steven Kennedy a half an hour before it was made public, said it has implications on several fronts.
This week global credit agency Fitch Rating placed Australia on a negative outlook - copying rival Standard & Poor's - based on the treasurer's "false numbers", Dr Chalmers said.
"We need to remember that businesses have been taking decisions based on the numbers Josh Frydenberg provided that turned out to be wrong," he told reporters in Brisbane,
Likewise, the Reserve Bank and International Monetary Fund have also based their forecasts for the Australian economy based on the program's initial estimates.
"Hundreds of thousands of Australian workers have been excluded from the JobKeeper program on the basis that the program was full when we now know that it was really three million workers short," he said..
"By excluding people from the JobKeeper program it means that more and more Australians have taken the decision to raid their super early with consequences and implications for their retirement."
Australian Associated Press