Via the excellent George Tharenou:
JobKeeper revised down materially from 6.5mn to 3.5mn = $60bn less spending
Australian authorities found reporting errors which saw the number of people on JobKeeper revised materially down from 6.5mn to 2.9mn. The expected peak was also cut sharply from 6.0mn to 3.5mn; reducing the fiscal cost by $60bn, from $130bn to $70bn. This means our estimate of total Government fiscal support (including States) is also significantly lower, albeit still totalling ~$164bn or ~8.7% of annual GDP (albeit mainly in Q2 and Q3). The ‘forecast miss’ was largely because of an assumed 6-month ‘hibernation’, but fewer COVID cases saw a quicker re-opening of the economy.‘Less bad’ labour market means we upgrade consumption and GDP forecasts
The JobKeeper revision is undoubtedly positive economic news, because the labour market & the budget are much less weak than previously thought. This also ‘confirms’ the surprising stabilisation of payrolls & wages, which saw us upgrade our household cash flow model to positive q/q across Q2 and Q3, with upside risk to spending, amid a rebound of sentiment. Recent channel checks indicate materially better (even positive) card spending, albeit this likely overstates total consumption given the near halting of cash payments which account for ~10% of spending. Importantly, UBS’s consumer survey indicates a surprisingly strong willingness to spend via less saving & more debt. Overall, while April retail & car sales had record collapses, early signs of improvement lead us to upgrade our forecasts for Q2 consumption to -7% q/q (was -9%). This is less of an upgrade than implied by the JobKeeper revision because since March we already assumed (optimistically at the time) a re-opening of the economy in late-Q2. That said, we are now even more positive than the Australian Treasury & RBA forecast of ~-15% q/q. For GDP, Q2 is also revised up to -8.5% q/q (was -10%); with 2020 now less bad at -5.2% y/y (was -6.1%), but with 2021 recovering less sharply to +4.6% (was 5.2%).
