Company profits ride the stimulus wave

Wednesday’s national accounts release for the September quarter posted another 4.2% quarter-on-quarter increase in company profits, which hit a fresh record annual high of $579 billion:

By comparison, total compensation of employees only rose by 0.5% over the quarter.

The divergence between workers and bosses since the pandemic began is stark and illustrated in the next chart:

Since the pandemic began in March 2020, company profits have risen by 22% versus a 5% increase for employee compensation.

The primary driver the of the surge in company profits is two-fold:

  1. Circa $130 billion of stimulus via JobKeeper and the Cashflow Boost; and
  2. Surging commodity prices.

The Cashflow Boost, in particular, did not require any eligibility to be met other than being a small or medium-sized enterprise with employees. It paid $36 billion to over 800,000 businesses, many of whom experienced boom years.

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