CBA: Aussie economy a ward of the state

CBA’s economics team has released more stunning data showing the extend to which government emergency income support is propping up the Australian economy:

  • Household income has surged in recent weeks primarily due to government payments(latest data to 7 August).
  • The number of people receiving JobSeeker has been increasing since early July across all states and territories.
  • The average total savings balance per household has risen sharply as growth in income has been stronger than growth in spending.
  • The divide between income and production has further widened over Q3 20.

Growth in wages and salaries paid into CBA bank accounts has firmed a little over recent weeks. Overall the shock to wages and salaries from COVID-19 is around -5% (our wages and salaries data includes JobKeeper).

Government benefit payments have stepped up sharply due to the second tranche of $A750 stimulus payments and an increase in the number of people receiving JobSeeker. Government payments are up a whopping 85%/yr.

The number of people receiving JobSeeker has increased since early July across the board. NSW and Victoria have posted the sharpest increases amongst the larger states. Victoria is expected to see further increases due to the stage 4 lockdown.

The number of people receiving JobSeeker has accelerated very quickly in the ACT over the past month. It is not clear to us why the number of people receiving JobSeeker has surged so quickly in the ACT.

The value of JobSeeker received has also lifted over the past month. The lift in the value of JobSeeker paid is much higher than the number of people receiving JobSeeker due the $A550 per fortnight ‘coronavirus supplement’. The ‘coronavirus supplement’ steps down to $A250 per fortnight in Q4 20.

The increase in government benefit payments is massive and has more than offset the decrease in wages and salaries paid. Our partial read on household income, which comprises wages & salaries and government payments, indicates household income surged over recent weeks(latest data 7August2020).

Growth in income has been significantly stronger than growth in spending. Savings have risen materially as a result. The CBA average total savings balance per household, including home lending related savings and transaction or savings accounts, was up 14%/yr at July2020.

The CBA average term deposit balance per household has risen steadily over the past few years. The average term deposit was up by 3%/yr at July 2020 and is up by 7% over the past two years. A pronounced uptrend in the average term deposit has occurred despite interest rates coming down.

Amazing data. Household income will obviously fall once emergency income support is wound back from October:

  • JobKeeper reduced from $1500 to $1200 ($750 part-time); and
  • JobSeeker reduced from $1100 to $815.

The Grattan Institute estimates this tapering will reduce income support from $18 billion a month (10.7% of monthly GDP) to $3 billion a month (1.9% of GDP) for the six months beyond:

Leith van Onselen
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Comments

  1. two plus twoMEMBER

    Incredible set of charts. The amount of pain that this is delaying is difficult to fathom. And so many people seem to have no idea…

  2. The90kwbeastMEMBER

    I fully predict these programs will be extended well into next year, and maybe beyond. If they remove them entirely, they’ll spark a depression and they know it, and be voted out of government.

    • I suspect that their neoliberal economic dogma will persuade them that payments to the plebs must be curtailed and they will cut benefits. All the while they will assume that the economy will magically bounce back when they do that.

      • The90kwbeastMEMBER

        I actually think there’s already been a come to Jesus moment, and the LNP has already pivoted away somewhat from Tony Abbot’s debts and deficits rhetoric. COVID is the excuse, so they no longer need to claim they are worrying as much about that.

        What they do claim, is they are ‘responsible economic managers’, which can be twisted to mean that they have kept the economy going via stimulus as was required per this duty statement.

        All governments just want to get re-elected, so if they keep these subsidies and support programs up, they will wedge Labor on the issue and not give them a platform, and not give away votes, and not wreck the economy.

    • They can only really continue this until a vaccine is found and speculation is March next year.
      To get it out to the masses, enough to open international borders, would be at least 6 months beyond that (an estimation/guess on my behalf, not based on science) Say, Sept/October 2021.

      Once the job keeper/seeker money in its current form stops flowing, the economy will be an open failure. Then the LNP are stuffed, the next election is in early 2022 and their reputation as good economic managers should be in shreds.

      But who knows? I’ve been tricked before. They might be able to drag it out long enough to get another election in, as we saw in 2019

      • There’s no properly tested vaccine coming.

        Look up Dengvaxia and what happens when you rush vaccines through.

        Good luck getting people to take the next generation Wuhan Virus vaccine if the first one ends up causing deaths.

  3. Tragically its the people saving and building up their buffer before the mortgage relief ends that will hurt the economy.
    You need to keep credit and spending growing. No point being sensible now.

    • The faux economy is toast having been built on property speculation, consumerism and debt.

    • Jumping jack flash

      Agree.

      Mortgage debt to 5 trillion by 2050. Draw a straight line from our current debt load of 1.8 trillion to 5 trillion on the total debt volume chart. Lower debt eligibility critera and start the debt injections to make it happen.

      2006 here we come! We all know it is what they desperately want

  4. bolstroodMEMBER

    Is this the moment we reappraise our society, shift the paradigm ?
    There is very obviously not going to be enough employment and housing opportunities for all who need them.
    For all the shouting and ballyhoo about industry and Corporate business being essential… are they really, if they suck all the profit out of the country while paying minimal or no tax ?
    Could we run a society for the common good of all Australians ?
    Cos we sure as hell are not doing it at the moment.

  5. Money tap aint gonna shut. The “pain” you all purporting to foresee will not eventuate atleast until after the election next year.

  6. Obviously a lot of that is super withdrawals being saved which will be in those stats. Last FY when I went onto JS I asked for 20% tax to be taken out, so I was getting $907 a fortnight (I did not want a robo debt). I changed that to 1% tax being taken out (stupid system wouldn’t let me do 0% tax) in late July, as I am not expecting to be earning much money this FY given the Covid situation in Hellbourne and the industry I work in seems to get permission to reopen later than others. I’m not sure how many others will have changed their taxable amounts on their JS, but that definitely has bumped my up $100 a week on income.

  7. I understand people in developing countries living day to day or week to week. Still they’re incredibly resourceful to survive and not die of hunger earning $5 per day.

    But in Australia is there anyone left whether an employer or employee with an ounce of self responsibility? Does anyone not plan for the worst case scenario?

    In a country where the average wage is $70k how can people and businesses be living hand to mouth? I see all these new cars on the road, retail going gangbusters, but half the country either on JobSeeker or JobKeeper, begging for mortgage holidays, etc.

    • Totally agree and ironically the people who are careful get punished for doing so. Massive debt levels to fund housing is the major problem so until we get a re-balance here people will always be skint.

    • Reus's largeMEMBER

      The answer is in the high cost of housing, people in poor countries don’t have to pay mega mortgages

      • Jumping jack flash

        This.

        The “quest for debt” allocates a lot of that 70k to getting past the debt ponzi buy-in which is exorbitantly expensive as asset prices rise, yet the buy-in and eligibility criteria for debt remains largely the same – oh, they lowered interest rates every so often to keep the quiet Australians quiet and the debt somewhat ticking over.

        But now?

        How fortunate a wild virus appears!

  8. To be honest I’ve always wondered about this. How do people afford the new 4wd, renovated house, etc especially in capital cities where the price of housing is high compared to the average wage? I always assumed it was “equity mate” and debt OR most non-corporate workers have found ways (e.g. tradies) to reduce their tax burden substantially. I assume its fractured a few marriages/relationships as well when everyone else is living it up but you want to be prudent.

    • If you only view life through a weekly, fortnightly, or monthly repayment, it only matters when you can’t make it.

    • Fabian AlderseyMEMBER

      Generally the responsible/prudent (whether people or businesses) have been totally outcompeted by those who grab as much debt as they can, and society seems to be set up to reward/ incentivise this.
      It’s horrible to see.

      • Jumping jack flash

        Debt is absolutely essential.
        Try the alternative. You’ll need to save up for longer than you will be alive to afford to buy a house without using debt.

        If you’re feeling lucky you could always try a different kind of gambling to get there, but a great pile of debt from the bank is safe and easy and it even looks like real money.

        • There is another alternative. A CRASH!

          This leads to a much healthier society overall (after a little bit of initial pain). Once people aren’t loaded to the eyeballs with debt they won’t have to work as many hours, or a second job just to make ends meet. They’ll have more time to spend with the families and friends, rather than work work work. Gosh they might even start being friendly with their neighbours!

    • Strange EconomicsMEMBER

      New 4wds are actually tax deductible for tradies, and the instant asset writeoff up to 70k utes or so.

      Luxury Ford Ranger top of the line with leather here we come. You can see then everywhere. 40% off from the government, to help the overseas makers.

  9. Jumping jack flash

    UBI, *cough* JobSeekerKeeper *cough* to be extended indefinitely, just like zero interest rates forever. A UBI is equivalent to an interest rate cut, all that is different is who pays for it, and the RBA is not going negative cash rate.

    Every time they need to “lower teh rates” they increase the UBI, i mean, JobSeekerKeeper. The effect is pretty much identical.