Coalition tweaks jobkeeper scheme again amid Covid second wave in Victoria

The Morrison government has tweaked the eligibility requirements for the jobkeeper wage subsidy only three weeks after cutting the payment in an attempt to save businesses and jobs at risk because of the deteriorating outlook in Victoria.

Ahead of Friday’s national cabinet meeting, and after new Treasury analysis underscored the hit to the national economy from the second wave of coronavirus infections in Victoria, the expenditure review committee of cabinet signed off on the jobkeeper overhaul late on Thursday.

The changes mean businesses and not-for-profits will only have to show a fall in turnover in the September quarter compared with a comparable period in 2019, rather than having to show declines in the June and September quarters to requalify for the subsidy after 28 September.

Related: Businesses hit by new Victorian Covid restrictions fear being thrown off jobkeeper scheme

After 4 January, businesses and not-for-profits will have to show a fall in the December quarter compared to a comparable period the year before instead of having to demonstrate a fall in turnover in the June, September and December quarters to access the payment.

To be eligible for income support, workers need to have been employed as of 1 July. The changes to be unveiled on Friday will apply nationwide, and will cost the budget $15.6bn.

Morrison flagged the tweaks were close at a press conference on Thursday, when he confirmed the lockdown in Victoria would likely push unemployment in Australia to 10% by the end of the year, not 9.25% as previously thought, and would cost the national economy between $10bn and $12bn.

Only three weeks ago, Morrison announced an extension of income support, but cuts to both the jobkeeper and jobseeker payments, on the rationale that the government could not keep “burning cash”. As well as lowering the rate of the jobkeeper wage subsidy and the $550 coronavirus supplement in jobseeker after September, the government proposed to tighten the eligibility requirements for both payments – including retesting businesses in October.

But the treasurer, Josh Frydenberg, said the overhaul was needed to preserve jobs and businesses given the stringent public health restrictions would hit economic growth and employment. “The introduction of stage four restrictions by the Victorian government will have a severe economic impact on the Victorian and Australian economy,” he said.

The treasurer said the changes recognised that some firms would have bounced back before the new restrictions hit, rendering them ineligible for ongoing balance sheet support.

The overhaul also takes into account employee turnover during the downturn. Previously eligible employees had to be employed as at 1 March 2020, but Frydenberg said: “To allow more employees to access the payment, we will now allow employees who were on the books from 1 July 2020 to access jobkeeper.”

Morrison said: “We’re doing whatever it takes to save lives and save livelihoods. Australia is facing a situation that is constantly changing. Our response is to get the right support to all those Australian families, workers and businesses that need us, as these circumstances change.”

The overhaul comes as the regular national cabinet meeting between Morrison and state and territory leaders will canvas the Victorian situation, conditions in aged care, a new code to cover freight, and economic reforms to boost recovery.

Leaders will also get an update on the review of hotel quarantine. Lapses in that program in Victoria sparked the second wave of infections in the state. There will also be a discussion about the commonwealth vaccine strategy.

Related: Victoria lockdown to push Australia unemployment to 10% and cost national economy up to $12bn

The government says Treasury has advised them a further 530,000 Victorians will be on jobkeeper during the September quarter because of the downturn triggered by the restrictions and Friday’s changes to eligibility. By the December quarter, the number of additional recipients will be 740,000.

The jobseeker overhaul and the national cabinet meeting come as Morrison considers growing calls for Victorian MPs and senators to be allowed to join the next sitting of federal parliament via video link. The continuing high rate of Covid-19 infections in Victoria poses significant logistical challenges for the sitting that is scheduled to begin on 24 August.

After an internal debate on Thursday where a range of views were expressed, Labor signed off on a proposition supporting “a hybrid system” where Victorian parliamentarians – and others who could not attend – would be able to participate by video link. The Labor leader, Anthony Albanese, has flagged that proposal with Morrison, and it is under consideration by the presiding officers in the parliament.

Some Victorian MPs have flagged their intention to travel to Canberra shortly in order to self-isolate for 14 days prior to the scheduled 24 August sitting.

Albanese said a solution needed to be found urgently “because if people are going to self-isolate in Canberra, they will have to travel this weekend”. Morrison told the Western Australian radio station 6PR that Victorian MPs and senators would be required to isolate either in Canberra or in their home state, but he did not comment on the video link idea.