- Australians are currently better off financially with Australian government benefits, according to Commonwealth Bank economists.
- New analysis shows the growth of government benefits has outstripped the decline in wages.
- However, there could be a lag in the data – and Australians are unlikely to be spreading that money around the economy for a number of reasons.
- Visit Business Insider Australia’s homepage for more stories.
In an unexpected turn of events, Australians should have actually found themselves financially better off in the month of April, despite a coming recession.
That’s at least according to some surprising analysis by Commonwealth Bank economists who found that on the whole we’re pocketing more in government payments as a nation than we’ve lost in wages – at least for now.
“Our data indicates that at an aggregate level the reduction in household income from job losses to date has been more than offset by an increase in government benefit payments,” CBA head of Australian economics Gareth Aird wrote in a note issued to Business Insider Australia.
“Indeed, the annual growth rate in our partial read on household income that comprises wages and salaries paid plus government benefits paid has risen over April.”
In other words, CBA customers are benefiting more from JobSeeker payments than they are losing by way of reduced hours and job loss. The net result being, Aird says, that we have “seen growth in household income rise”.
There are now as many as 50% more Commonwealth Bank customers receiving the payments than previously, which has seen the amount of government support paid swells by up to 60%. That’s before the doubling of the payments, beginning from Monday, is even taken into account.
While many recently unemployed Australians would quickly disagree, it’s strange to think that a recession oft-compared to the Great Depression may have left the country better off – at least in the heavily abstracted financial sense
Certainly, CBA concedes the data is in a state of flux but that the trend may continue for the immediate future.
“Included in wages and salaries paid will be people who have lost their jobs but have continued to receive some form of payment from their employer due to their contractual arrangements, [such as] 4 weeks paid notice on termination, leave paid out etc,” Aird said. “So there will be a lag between job losses and the full impact on the total wages and salaries bill.”
But the short-term nature of payouts will soon be compensated, Aird contends, by the lagging JobKeeper wage subsidies, due to be paid from May.
It’s at least encouraging that the broadened scope of the JobSeeker Allowance is working.
On balance it’s unlikely to mean the economy is much better off, with CBA predicting any extra cash will simply be saved rather than spent, as Australians squirrel away their acorns for what could be a long winter.
While Aird doesn’t elaborate, presumably some of that may be used by Aussies to tackle the eye-watering amount of debt they’ve accumulated over the years.
“Monetary and fiscal stimulus can’t boost spending in the economy on a range of goods and services when the business that produce them are not open. But fiscal stimulus can help to plug the gap in household income that is a natural consequence of job losses,” Aird said, noting the bank expected savings rates to “surge” leading to the mid-year.
“The shock to spending dwarfs the shock to income.”
In other words, while our wallets get a little fatter in the short term, the real economy which employs us will be a whole lot worse for it.
- $130 billion will be shaved off the Australian economy this year, as the IMF forecasts the worst recession since the Great Depression
- Australians warned they could be taxed for ‘a generation’ to pay off $1 trillion debt, as the budget blows out fighting the coronavirus
- Around 1.6 million Aussies are expected to withdraw part of their super from Monday, as the government begins accepting applications
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