In just 14 days time, hundreds of thousands of Australians will have their weekly earnings slashed - and then the real financial pain will begin.
In just 14 days time, hundreds of thousands of Australians will have their weekly earnings slashed - and then the real financial pain will begin.

This is the date incomes will plummet across Australia

The most important graph in Australia right now is this one:

The wages shortfall has been replaced by benefits and then some. Picture: Supplied.
The wages shortfall has been replaced by benefits and then some. Picture: Supplied.

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It comes from the Commonwealth Bank of Australia and it shows how much more money Australians are making than the year before. It's a lot. We're flying.

The black line is now at 16 per cent, which means we're making 16 per cent more money in 2020 than last year.

Think about it like this: Australians who were banking $1000 per week last year are banking on average $1160 now. That's a lot of extra money each week.

Where is the cash is coming from? Up until the start of the pandemic, the black line was being held up by the blue bars: earnings from work, i.e. salary and wages. We were 4 or 5 per cent richer than the year before, because more wages were being paid.

Then the COVID-19 pandemic starts. The blue bars turn slightly negative - wages and salaries went down (they would have gone down even more if not for JobKeeper!). But the red bars shoot up. That's Treasurer Josh Frydenberg turning on the money taps.

JobSeeker is the big one, and the two $750 payments that went to pensioners.

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Treasurer Josh Frydenberg injected cash into the economy like never before to see Australia ride the COVID wave. Picture: Mick Tsikas/AAP
Treasurer Josh Frydenberg injected cash into the economy like never before to see Australia ride the COVID wave. Picture: Mick Tsikas/AAP

The surprising thing is the government payments are so big they're enough to actually increase the amount of money being earned by Australians on average. That makes this a very surprising recession. Normally in a recession people get poorer. Not this time.

So far anyway. That's why this graph is so vital to understand right now. Because those government payments have expiry dates.

The two $750 payments are done and dusted, for starters. Then there is JobSeeker. That's the payment we used to call the dole. It was doubled back in March, via a "coronavirus supplement" of $550 a fortnight. That will go for just one more fortnight, before adjusting to $250 a fortnight.

Thousands of Aussies will see their fortnightly income fall by $300 on September 24. JobSeeker will also be means-tested from that date, so people with a lot of wealth won't be eligible. They'll be booted off the payment.

When that happens, the overall income of Australians will fall for the first time this recession. And it might start to really feel like a recession. Mark the date: September 24.

It doesn't help that just four days later, on September 28, the JobKeeper payment will also change. Not only will it get smaller ($1200 a week instead of $1500, and reduced to $750 for part-timers), far fewer businesses will qualify for it. People will no doubt be let go by their employers once JobKeeper stops.

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March saw huge queues outside Centrelink offices and when the JobSeeker and JobKeeper changes hit the unemployment rate could go up again. Picture: Scott Barbour/AAP
March saw huge queues outside Centrelink offices and when the JobSeeker and JobKeeper changes hit the unemployment rate could go up again. Picture: Scott Barbour/AAP

All this is happening while Victoria is still struggling to get the virus under control and retailers are forbidden from opening their stores to the public.

The government is obviously a bit worried about September, and it has at the last minute decided to delay another dangerous rule change.

Since March, companies have been able to run up debts and not repay them. Normally doing that would be enough to make a business go broke. But this year, to try to keep businesses alive, the government relaxed all the rules.

A business could run up more debts and not repay them for longer without the law getting involved. That was due to snap back in September too. But now it has been extended to December 31. That will provide welcome relief in September. (Although it might just delay problems until the new year.)

Many people have lost jobs already. The street near my house is already full of vacant shopfronts. But for many Australians it hasn't really felt like a recession yet. House prices have remained remarkably steady, the stock market has bounced, and spending at major retailers has been very strong. JB Hi-Fi is making a motza.

That could all change in just two weeks. These sudden shrinkage in these government payments will make that graph look very different, as incomes suddenly fall. And we could be experiencing a much more grim mood on the way into Christmas.

Jason Murphy is an economist | @jasemurphy. He is the author of the book Incentivology.

Originally published as Date your income will plummet


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