Australia’s recession is ending, but for the poorest, financial hardship will increase
The latest estimates of Australian household income, wealth and costs show clearly that if you want to reduce the level of financial pain for low incomes, raising jobseeker works.
You would not expect that the financial stress of low-income households would fall, nor that their income would rise, during a recession.
And yet that is what the latest household financial survey from the Australian Bureau of Statistics shows occurred, due to the $550 per fortnight coronavirus supplement that was being paid up till 24 September 2020.
Throughout March to September last year the median incomes for most households rose:
Graph not displaying? Click here The only ones really to see a drop in real gross income were the richest 20%, which is not surprising as their income is more likely to be based on rental incomes and equity holdings.
But do not worry too greatly for them – their net worth rose quite nicely, as it did for most households as property values rose and liabilities fell:
Graph not displaying? Click here
But while this points to the economy not collapsing completely during the recession, what is most revealing within the survey are the indicators of financial stress and the government’s two main responses to the pandemic.
For workers, the job-keeper payments were the most crucial; while for others the jobseeker supplement was
key.
The job-keeper payments were nicely spread across all households other than those in the poorest 20%, while overwhelmingly the beneficiaries of the jobseeker supplements were in the poorest 40%:
Graph not displaying? Click here This is not surprising – most people who have jobs are spread evenly across the income spectrum, while those who are unemployed and on jobseeker are going to be more featured among the poorer households.
But what is revealing is the impact of the supplement.
Those who received the jobseeker supplement payment were much more likely to be experiencing some form of financial stress than other households: Graph not displaying? Click here Forty-three percent of households receiving the jobseeker supplements experienced two or more symptoms of financial stress compared with less than half that number among all Australian households.
Again this is not surprising – we know those receiving the supplement were more likely to be in the poorest 20% of all households and we know that the poorest households suffer from financial stress the most (if they didn’t they would not be poor!).
But what is striking is that from March through to September last year, the biggest drop in financial stress occurred among the poorest households, while for others it either remained steady or even rose:
Graph not displaying? Click here The middle of last year was a period of particularly strong rising financial stress for the richest households. While the richest experienced less financial stress overall than those poorer, they did see the biggest rise.
For example, there was a 1.8% rise from March to June of the number of households in the richest 20% being unable to raise $500 in a week for something important. By contrast, there was a 3.8% fall among the poorest 20% of households being unable to raise that amount of money.
The four most common indicators of financial stress are spending more money than you have received, not being able to pay a utility bill on time, putting off dental treatment, and needing to seek help from family or friends.
And yet in September last year, there were fewer households in the poorest 20% experiencing these hardships than in September 2019.
In September 2019, 18% of the poorest households were unable to pay a utility bill on time; by September last year that had fallen to just under 10%.
Who knew getting an extra $550 a fortnight might help pay bills?
Graph not displaying? Click here The coronavirus supplement for those on jobseeker was clearly a success.
And here we come to the problem – it was a success.
On 25 September last year (after these figures were gathered) the bonus was reduced to $250, then to $150 at the end of 2020. Now it is gone, replaced by a $50 increase in the fortnight base rate – or $500 a fortnight less than what was ensuring the large falls in financial hardship observed in this survey.
And so what we will likely see is a recession end, but for the poorest, financial hardship increase: a truly odd, and cruel, scenario.