Income losses offset by benefits

The fall in incomes in April has been offset by an increase in government benefit payments, the Productivity Commission says.

Treasurer Josh Frydenberg in Canberra. Picture - Supplied

The Productivity Commission has left the door open to back the government’s unprecedented fiscal stimulus, as analysis emerges showing the fall in household income in April has been more than offset by an increase in government benefit payments.

In the commission’s annual review of industry subsidies, released on Tuesday, chairman Michael Brennan said the government’s stimulus measures, which are budgeted to cost about $214bn, “should not be seen in the same light” as the assistance measures catalogued in the latest update.

“They form part of an economic stimulus to mitigate the supply-and-demand shocks posed by the pandemic … and in any case … assistance measures should not ­always be seen as adverse,” he added.

28 day rolling total jobkeeper

Separately, a new Commonwealth Bank analysis of aggregate trends in customer bank accounts found a 50 per cent increase in the number of accounts in April that had received the beefed-up JobSeeker unemployment benefit.

“The first tranche of the $750 cash payments to 6.5 million Australians has been paid; the net ­result has seen total government benefits paid rise by 60 per cent on the previous year in April and this does not take into account the doubling in JobSeeker, which takes effect from 27 April,” said senior economist Gareth Aird.

“At an aggregate level the reduction in household income from job losses to date has been more than offset by an increase in government benefit payments.”

Stimulus worth almost $66bn is budgeted to be paid before the end of this financial year, ahead of a further $126bn next year, mainly in form of JobKeeper payments to keep workers in jobs. “Our data highlights the profound impact that fiscal stimulus has on the household sector,” said Mr Aird.

The commission also warned the government the rules-based global trading system from which Australia had benefited was in peril, urging it “to promote open trade in goods and services … [which would be] particularly important for economic recovery”.

“Even before the outbreak of COVID-19, the era of the world’s rules-based trading system that led to open, prosperous global economies since the end of World War II had stalled. This is bad for business, and bad for jobs and income,” Mr Brennan said.

The commission said the failure to appoint appellate judges to the World Trade Organisation had hamstrung that body’s ability to arbitrate trade disputes.