More Australians were receiving a pay cheque in the first half of the year compared to the same time last year – but the extended lockdowns in NSW and Victoria will see this encouraging trend slide backwards in the next quarter, new analysis has revealed.
Australia’s economic growth in the first half of 2021 saw the number of households receiving salaries rise for every age group, according to new research from Australia’s biggest bank.
At the same time, the number of households receiving government benefits fell during this time.
But the positive momentum in the economy has rapidly lost steam as health authorities scramble to contain the Delta outbreaks in Australia’s east coast.
“This trend is likely to partly reverse in [the third quarter of] 2021 in the face of job losses and extra government support payments during the current lockdown in Greater Sydney and Victoria,” wrote CBA senior economist Kristina Clifton in the research report.
CBA's analysis was echoed by thinktank Australia Institute senior economist Matt Grudnoff.
“It is very likely that the number of people on welfare payments will rise in the September quarter,” he told Yahoo Finance.
“With around half of Australia’s population now back in lockdown, the concern is that the Federal Government is not taking its role of stimulating the economy seriously enough.”
Grudnoff described the Government's response as "piecemeal" and aimed at "filling holes" rather than strengthening the broader economy.
“If government does not take its job as the manager of the macroeconomy seriously, Australia could go into a double dip recession, one that we emerge from slowly, which would come with it pain, misery, and economic scaring.”
No lockdown payments for JobSeekers
The Federal Government has introduced $375 and $600 weekly payments, depending on how many hours of work is lost, for people who have been unable to work because of the lockdowns.
“Our big concern right now is for those people who overnight lost their income from casual or part-time jobs, or are prevented from getting paid work, who are also registered as JobSeeker, Youth Allowance or Parenting Payment recipients, and are locked out of accessing the Disaster payment system,” said Australian Council of Social Services (ACOSS) CEO Cassandra Goldie.
In order to be eligible for the COVID-19 Disaster Payments, you cannot be receiving any form of welfare benefits.
But this rule is creating a “two-class income support response”, she said.
“You can earn up to $609 a week and still be on Centrelink’s system, even if they only pay you $1 a fortnight, but because of recording social security, you are barred from the Disaster payment,” said Goldie.
“Income support must be fixed so it is adequate for all affected. It is unconscionable that people with the least, hit hardest, have been excluded.”
Strong indicators of growth before lockdowns hit
CBA’s report outlined several encouraging signs about Australia’s economic recovery up until the lockdowns.
The number of households making home loan repayments were higher than pre-COVID levels, Clifton said.
“Ultra low mortgage rates, particularly fixed rates, has seen the number of first home buyers rise which lifts the share of households making loan repayments.”
The sum of the average home loan repayment and average rent repayment was also rising in the first half of the year.
And even before the lockdowns began, Australians were being much more wary about their wallets, with spending intentions across several fronts slated to decline.
“June 2021 saw declines in spending intentions for Home buying, Retail, Travel, Entertainment and Motor vehicles,” said CBA chief economist Stephen Halmarick in a separate report.
The latest restrictions will make Australians even more unwilling to spend, he indicated.
“With the lockdowns in Greater Sydney and Victoria continuing, further weakness could be expected in coming weeks,” he said.
The impact of the lockdowns has already been reflected in CBA’s credit and debit card data: NSW card spend dropped to -0.6 per cent compared to 2019 levels, when it was 2.1 per cent the week before.
“The fall in card spend has been quite large given 30 per cent of the population in regional NSW are operating in a much more open economy,” said Halmarick.
Economic recovery quickly turning sour
Economists have been revising their positive economic forecasts as NSW’s lockdown stretches on, with AMP Capital chief economist Shane Oliver now anticipating 4 per cent GDP growth for 2021 rather than 4.75 per cent.
Every week in lockdown shaves $1 billion off the economy, he told Yahoo Finance last week.
Independent economist Stephen Koukoulas said the failed vaccination rollout meant Treasurer Josh Frydenberg was looking likely to preside over the second recession in two years.
“All economists are assessing the economic effects of the current lockdowns. While it is clearly a work in progress event – no one can be sure how long it will last and whether it extends – there is a growing consensus that September quarter GDP growth will be negative,” he wrote for Yahoo Finance.
“This seems a fair assessment with half of Australia locked down.
“The question for a recession is whether the December quarter GDP will also be negative.”