Today we learned that, as Reuters reports, Australia consumer sentiment hits 10-year high (see chart above). This is despite Chinese trade restrictions and the looming insolvency tsunami in the new year and the fiscal cliff in April 2021. Sure, given we’ve crushed COVID in Australia and a vaccine is on its way, there are reasons to be confident, but both consumer and business confidence figures look too high to me, all things considered. So, what’s going on?
The most likely reason for buoyant confidence is that Australians have been over-compensated by the federal government for the COVID-recession, via JobKeeper and the JobSeeker coronavirus supplement. Future historians and economists will look back and wonder what led a notionally conservative government to bring in such massive support measures. But let’s leave the debate over whether such measures were necessary and desirable to a later time. Let’s just review their impacts by considered data from the September quarter National Accounts released by the ABS last week.
First, check out the spike in social assistance benefits to households this year (chart below).
Second, check out the boost in profits of incorporated businesses, partly due to JobKeeper, after an initial fall in the March quarter (chart below).
Third, check out how Gross Mixed Income, largely of the self-employed and sole traders, has been juiced up by JobKeeper (chart below).
Fourth, understand the consequences of all this assistance are continued growth in household incomes despite COVID (see chart below)…
…and a big pool of savings (see chart below) which consumers will be able to spend over Christmas and in the New Year. It’s certainly been the most unusual recession we’ve ever seen.
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