It’s been another big week dominated by the Federal Government’s enormous $130 billion package to keep Australian in work. It’s the biggest economic package in Australia’s history and dwarfs anything announced during the Global Financial Crisis.
It is an enormous statement from the Federal Government that they are determined to cushion the financial and economic impact of the Covid-19 pandemic on average Australians.
Basically Job Keeper has single handedly stopped us going into an economic Depression. We’ll still go into a deep recession (we’re already in one) but not a Depression which was very much on the cards.
To give you an idea of the impact of Job Keeper, Westpac had predicted unemployment would rise to a whopping 17 per cent … after Job Seeker they’ve revised that down to 9 per cent. In other words, it has saved 1.2 million jobs… that’s a lot of Australians being kept in a job.
It’s about half of the quarterly wages big of private sector wages… excluding public service, health and education.
When you add up all 3 major economic stimulus packages, the Federal Government is spending about $320 billion (the equivalent of 16.4 per cent of the economy) to support the economy against the pandemic.
What is JobKeeper
JobKeeper is a subsidy to businesses, to keep more Australians in jobs where a business (earning less than $1 billion in revenue a year) has suffered a 30 per cent year-on-year fall in revenue because of the impact of the Coronavirus on the economy. Businesses with revenue over $1 billion a year have to prove a 50 per cent fall in revenue to qualify.
The payment will be paid to employers, for up to six months, for each eligible employee that was on their books on 1 March 2020 and is retained or continues to be engaged by that employer. Where a business has stood down employees since 1 March, the payment will help them maintain connection with their employees.
Employers will receive a payment of $1,500 per fortnight per eligible employee. Every eligible employee must receive at least $1,500 per fortnight from this business, before tax.
The program commenced 30 March 2020, with the first payments to be received by eligible businesses in the first week of May as monthly arrears from the Australian Taxation Office. Businesses can begin distributing the JobKeeper payment immediately and will be reimbursed from the first week of May.
Eligible employers will be those with annual turnover of less than $1 billion who self-assess that have a reduction in revenue of 30 per cent or more, since 1 March 2020 over a minimum one-month period. Full time and part time employees, including stood down employees, are eligible to receive the JobKeeper Payment as well as casuals who have been with a business for over 12 months. Self-employed individuals are also eligible to receive the JobKeeper Payment.
There’s been extra help to qualify for JobSeeker
Two weeks ago the Government announced their $1100 JobSeeker payment for those unemployed.
But a problem for a lot of people has been they have been ineligible because their partner was earning over $42,000 a year.
The Government has now lifted the partner income test to $79,000 a year to make it easier to qualify… that is a big help.
Could China rescue us again
During the Global Financial Crisis Australia didn’t follow the rest of the world into an economic recession for basically two reasons:
1. A very smart and effective economic stimulus package from the Rudd Government
2. China continuing to expand and become our biggest customer
There is no doubt China taking our exports (which is now up to 37 per cent of our total exports) helped us get through the GFC in pretty good shape.
Fast forward to this crisis and China was the epicentre of Coronavirus… it’s where this new strain originated, in Wuhan.
The epicentre has now moved to Europe and the US where the numbers are simply devastating. I’m still coming to grips with this morning’s figures that 6.6 million Americans registered as unemployed just last week… and that’s on top of the 3.3 million the week before.
So 10 million Americans have registered as unemployed in just the last 2 weeks… that is extraordinary and by far the worst employment figures in America’s history. Some are predicting an unemployment rate in the US of 20 per cent… which would be heartbreaking.
While Europe and the US are being ravaged (and the experts don’t believe it has peaked yet), China seems to be coming out the other end… has crossed the bridge using Scott Morrison’s analogy.
This week China released figures on the health of their manufacturing and services sectors… and those results were a lot better than expected. Indicating the Chinese economy has bounced back quickly to almost full steam.
The numbers were so good that they were a bit too good to be true.
But having said that, as we go into winter, a strong China starting to take more of our exports could provide a useful economic tonic for Australia. Here’s hoping.
Property is not immune
During my Facebook Live question and answer sessions (every Tuesday at 2.15pm EDT) I’ve had a lot of questions around how the property market will react to the economic upheavals.
I’ve already said property will not be immune and last week’s big drop in auction clearance rates is proving that. Clearance rates have dropped from 80 per cent to 60 per cent in just 2 weeks.
Property is driven by confidence, interest rates and access to finance. While interest rates are low, confidence is being shot to bits with the economic shocks of Covid-19.
On a quirky note… lipstick sales have fallen
There’s a pop culture financial benchmark that says lipstick sales always go up during a recession. The rationale is that when times are tough and we can’t afford big ticket items like cars or furniture, we buy smaller treats to as a reward to keep our spirits up.
For women that treat is lipstick. It has been a very consistent bell weather of a recession.
So I was a bit worried this week when Adore Beauty said lipstick sales had fallen 24 per cent since February but soap and sanitisers had skyrocketed.
For me it’s an indication how scared everyone is and how deep the recession is expected to be when even lipstick sales fall.