COVID-19: Australia’s $60bn income pain has been saved
COVID-19: Australia’s $60bn income pain
New analysis by Deloitte Access Economics puts some numbers behind the hit to Australians’ incomes and company profits caused by the virus to date
29 April 2020: COVID-19 is carving a path through the incomes of Australians. In the four months from the start of April – the likely deepest period of pain – lost wages and profits are set to be almost $60 billion. And that’s even after allowing for the extraordinary support to families and businesses that has been rolled out by the Federal Government.
The pain of lost incomes isn’t equally distributed. Not surprisingly, the deeper the lockdown impacts, the deeper the income losses.
Deloitte Access Economics estimates that cafes, restaurants, pubs, hotels and motels (they show up in the chart as ‘accommodation and food services’) will be short about $8 billion in lost wages and profits in the next handful of months. That’s the biggest hit to any industry, especially given that this is a small industry, accounting for only about one fortieth of the economy overall.
There’s almost as big a hit to ‘arts and recreation’ – Australia’s empty gyms, sporting fields, entertainment centres, conference centres, movie theatres and playhouses.
The next hardest hits are big mostly because these industries are big. Mining is still open, but its incomes are set to fall $5 billion short in the next few months. It is struggling to get some of its workers onsite, as they’d ordinarily fly into remote locations for short stints from out-of-State. But they can’t cross those borders now. And some of our export earnings are taking a hit. For example, the record low oil prices seen around the world also mean lower gas prices. Given that Australia is now the world’s largest or second largest gas exporter, that’s draining dollars we’d otherwise be earning.
Construction is open as well. And governments – federal, state and local – are trying hard to speed up or add to the construction projects that they’re financing. But a bunch of private sector projects are slowing, and some projects are being put on hold, as businesses reassess the need to build.
The losses are also notable in professional services – lawyers, accountants, IT support, architects and advertising. Even though demand is up in some areas (such as IT), advertising is particularly hard hit, and lawyers and accountants are seeing less work alongside the fall in national commercial activity.
At the other end of the scale are sectors where taxpayers pay many (or all) of the bills, meaning that income losses are rather smaller.
Although universities and colleges that rely on foreign students are trimming their staff numbers, lost income in education remains small.
And the utilities – generators and retailers of power and water – are essential services. So, remain open, and demand remains high. But some big industrial users of power and water have closed or aren’t running at full speed, so there are some losses.
Then there’s the public sector itself. Outside some public-run libraries, museums and galleries, it too is running as normal, and it hasn’t seen the cuts to wages evident in most other sectors.
A surprise packet in this list is retail. The hardest hit parts of that sector are obvious in any shopping mall and in a series of high profile layoffs and stand-downs. But don’t forget that supermarkets are open, online sales are strong, and a bunch of specialty stores (such as hardware) are trading with social distancing rules in place.
And the other surprise here is health care. The likes of dentists and parts of the private hospital system have been running on empty as Australia struggles with the coronavirus crisis. So even our most essential sector has seen income losses too.
And the good news? These income losses are awful. Some small businesses have closed their doors forever. But Australia has fought a world class fight against the coronavirus, and it increasingly looks as if the worst will soon be behind us.