Explainer: How Australia’s ‘harsh’ debt and jobless numbers affect you
The reality of Australia’s economic update amid the coronavirus pandemic is “harsh”. But some questions are worth asking to get your home, job, super and investments in order.
Money
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Huge national debt, surging unemployment and a deep recession are a frightening combination confronting Australians, but how do they affect your household?
Our first recession in three decades has been confirmed by a 7 per cent slump in the economy in the June quarter, and Treasurer Josh Frydenberg said unemployment was forecast to peak at 9.25 per cent later this year.
For Australians lucky enough to escape COVID-related job or health problems, life continues relatively normal, but some questions are worth asking.
WHAT DO THE JOB NUMBERS MEAN?
If you’re among the 870,000 people who lost their job between March and May or the one million-plus who had working hours reduced, unemployment is a big worry. And it hasn’t peaked yet.
However, the safety nets of JobKeeper and the JobSeeker coronavirus supplement were this week extended beyond September – and you can expect the government will act again where needed.
Mr Frydenberg said without JobKeeper another 700,000 jobs would have been lost and unemployment would have hit 14 per cent.
DOES THE NATIONAL DEBT AFFECT ME?
Not as much as you might think. The government spent $86 billion more than it earned in 2019-20 and expects that deficit to widen to $185 billion this financial year.
Before COVID-19 it was aiming for a surplus rather than these massive deficits, but the pandemic changed everything.
Taxpayers will have to pay back this debt, but the government is banking on future economic growth to fuel the repayments rather than higher taxes or spending cuts.
Australia’s gross national debt will balloon to $852 billion by next June, but as a proportion of our economy it will still be lower than many major countries’ debt ratios were before COVID-19 struck.
And record low interest rates means the nation’s annual interest bill – $16.3 billion – is manageable.
DOES IT IMPACT MY SUPER AND INVESTMENTS?
Super funds and sharemarket returns have been resilient during COVID-19, bouncing back strongly since their March crash.
And Australia’s relative success on the health and financial front battling the coronavirus puts us in better shape than most countries.
Now is not the time for knee-jerk reactions. If you’re worried, seek advice.
WHAT ABOUT MY HOME?
House prices can get smashed by rising unemployment, but government stimulus and banks’ home loan repayment holidays have kept home values stable in many markets.
There are pockets of pain and some investors are selling up, but real estate should be seen as a long-term asset.
Tenants may enjoy lower rents as more short-stay rentals return to the traditional housing market because of coronavirus border closures.
Originally published as Explainer: How Australia’s ‘harsh’ debt and jobless numbers affect you