It may come with a heady price tag, but the government’s massive JobKeeper expenditure will help spare its blushes when the June quarter GDP numbers are released in September by the Australian Bureau of Statistics (ABS).
On Monday the ABS said JobKeeper payments would be included in the national accounts, which will mean GDP figures for the June and September quarters (at least) will be better than expected.
The ABS said JobKeeper payments would “be classified as an ‘other subsidies on production’ paid from government to eligible employers”. That was one choice for the ABS. The other was to classify JobKeeper not as a production subsidy but as a “social benefit”, which would have meant it was not included in the national accounts.
“Salaries or wages will continue to be classified as either compensation of employees or gross mixed income for eg self-employed persons,” it said. “These payments demonstrate a formal job attachment.”
The payments will affect national accounts via compensation of employees (CoE). The December quarter national accounts revealed the CoE totalled $237.5 billion.
A $60 to $65 billion JobKeeper boost payment in the current June quarter, and then again in the September quarter, could be well over a quarter of the combined figure for CoE. Depending on the size of the fall in wages and salaries in the CoE, it could actually cover the decline in wages from people losing their jobs, losing hours or taking a pay cut.
But JobSeeker payments to the unemployed won’t be counted. Social benefits “received by household intended to provide for the needs that arise from certain events or circumstances, for example, sickness, unemployment, retirement, housing, education or family circumstances” — which includes JobSeeker payments — aren’t included, because (although the ABS doesn’t say explicitly) they are not associated with any production.
That’s despite the fact the ABS admits “some employers receiving JobKeeper payments will be actively involved in production and some will not”. But that won’t prevent their payments from being included.
If it sounds arbitrary, even contradictory, the classification follows international rules for national accounts and statistics and guidance from the International Monetary Fund and International Labour Organisation. The government plays no role in deciding how the ABS classifies the spending.
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But it does point to why GDP growth (and contraction) figures are not the really meaningful guide to the impact of the pandemic. That will continue to be unemployment, where the ABS is treating JobKeeper recipients as officially employed but also going to great lengths to illustrate the true effect on the labour market of the crisis.