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UPDATE 1-Australia starts to wean economy off COVID wage subsidy scheme

(Updates to show Australia made announcement, adds reaction quote)

CANBERRA, March 9 (Reuters) - Australia will spend A$1.2 billion ($920 million) to expand its wage subsidy scheme for apprentices, Prime Minister Scott Morrison said on Tuesday, the first step in weaning the economy off a larger COVID-19 wage subsidy scheme.

The A$70 billion scheme, known as JobKeeper, through which the government subsidises wages for workers in businesses damaged by the coronavirus pandemic, is to run until the end of March.

Morrison has said the scheme will be replaced instead by targeted stimulus, the first stage of which will be an expansion of the scheme to pay part of the wages of apprentices.

“Last week’s national accounts showed the comeback of the Australian economy is underway,” Morrison said in a speech in Sydney.

“However many businesses still need support and it’s important our apprentices and trainees get opportunities to boost their skills and stay employed.”

Figures from the Australian Bureau of Statistics last week showed the jobless rate dropped to 6.4% from 6.6%, better than market forecasts of 6.5% and down from a peak of 7.5% in July.

The end of JobKeeper has stoked some concern about whether unemployment could rise, but Treasurer Josh Frydenberg on Tuesday sought to allay those worries.

“Even when JobKeeper ends the unemployment rate over the course of the year will steadily come down,” Frydenberg told Australia’s Channel 9.

Australia’s apprentice scheme will see the government pay half the wages of apprentices, up to a maximum of $7,000 each quarter for 12 months. It will now run until September 2022.

It will no longer be capped, Morrison said , with the government expecting 70,000 new apprentices to be covered.

Australian businesses welcomed the plan.

“Extending this programme delivers certainty for businesses who seek to hire employees, especially as the subsidy will be available for 12 months for all apprentices and trainees”, Con Castrisos, who leads the industry body, Restaurant & Catering Australia.

$1=1.3092 Australian dollars Reporting by Colin Packham; Editing by Clarence Fernandez and Michael Perry