Weekly economic briefing -
05 May 2020
A personal view on topical financial and economic issues by David Rumbens
Sharing the burden
A range of recent ABS data releases highlight the economic burden that is COVID-19. Payroll data released today reveals that employment continued to decline across all states and territories in the week ending 18 April. Between mid-March and mid-April, employee jobs fell by 7.5% (around 975,000 workers) and total wages paid dropped 8.2%.

Unsurprisingly, jobs in accommodation and food services (33.4% fall) and arts and recreation services (27.0% fall) continue to bear the brunt of this COVID19 fuelled recession. The age profile and strong reliance on a casual workforce in the worst affected industries mean that job cuts have disproportionally affected younger Australians under 20 (-18.5%) and between 20-29 (-11.8%), as well as those aged 70 and above (-13.9%).

Chart: Job losses by industry (14 March – 18 April 2020)
Source: ABS Weekly Payroll Jobs and Wages

Severe job losses and reductions in wages have already impacted the finances of Australian households. The ABS has estimated that over the month to mid-April, almost one third of adult Australians experienced worse household finances because of COVID-19. Those aged 18 to 64 were more likely to be affected than those 65 and over, with the older demographic more likely to have received the government’s $750 cash payment, have greater savings (including access to superannuation), and be less exposed to changes in the labour market.

Over the same period, one in seven (14%) adult Australians saw their household finances improve (perhaps a consequence of the $750 payment going out to one in four adult Australians). More may find themselves in this position over the coming month, as the $550 increase in JobSeeker (previously Newstart), rent relief, and JobKeeper start being paid (which for some workers will represent a wage increase).

Australia’s economic performance will partly depend upon whether Australians save or spend these payments. Of the 6.5 million people who received the $750 payment, 53% said it was mainly added to savings or not yet spent at the time of responding. Specifically, people aged 65 and over were three times more likely to receive the payment than those aged 18-64, but were twice as likely to have not yet spent it.

Working-aged Australians have therefore experienced greater financial burden as a result of COVID-19 compared to older Australians, who are more vulnerable to the virus’ physical health risks. These disproportionate impacts are compounded by the ABS’s finding that working-aged adults were almost twice as likely as those aged above 65 to have experienced feelings related to anxiety over the past month. More broadly, the ABS household survey finds that feelings connected with anxiety between mid- March and mid-April were twice as high compared to a previous health study across 2017-18.

COVID-19 has also ravaged most Australian businesses, and like households, the damage has varied for firms of differing size and sector.

In the next two months, 72% of firms expect to be hurt by lower cash flows, and 69% anticipate pain from reduced demand for goods and services.

Beyond then, capital expenditure forecasts for 2020-21 have been revised down by 16% of businesses, the majority of which are reporting cash flow concerns (72%) and difficulties paying operating expenses (54%).

So, the federal government’s JobKeeper package is very much the Australian economy’s life support policy, designed to keep workers connected to businesses during the economy’s COVID-19 induced coma and enable a faster recovery.

Fortunately, and so far, it seems to be working, with 44% of businesses reporting that the announcement of the government’s wage subsidy policy impacted their decision to continue to employ staff. This includes 45% of small and medium sized firms, 35% of large firms – and 67% of accommodation and food services businesses.

At the same time, 61% of Australian businesses have registered, or intend to register, for JobKeeker. This points to a significant difference (17%) between the number of businesses for whom JobKeeker impacts employment decisions, and the number who will apply.

The sectors with the highest proportion of applicants are construction (80%), administrative and support services (79%), which includes travel agencies, gardeners and cleaners, and accommodation and food services (76%).  By contrast, the survey found that electricity, gas, water and waste services (17%), mining (17%), and financial and insurance services (17%) exhibited the lowest JobKeeper application rates. This fits with the ABS payroll data, which found that employment in these industries experienced the least change from March to April.
For any questions/comments on this week's Briefing, please contact:
Partner, Deloitte Access Economics
Tel/Direct: +61 3 9671 7992
Graduate, Deloitte Access Economics
Tel/Direct: +61 3 8486 1565
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