For 60 years, this graph has been boring. Because government has been boring. A steady increase in taxes on production and imports and a steady decrease in subsidies. Nothing to see here.

No economist checks in with this ABS data series because it never does anything. But now? Wow. It gives us an amazing perspective on the size of government stimulus: Instead of taking money out of the business sector, government has been pumping it in.

From being a $50 billion drag on company operations it flipped to adding $13 billion dollars over the last two quarters. This captures several moving pieces: cashflow support for business, JobKeeper, plus decreases in corporate income tax as companies made less profit.

Most importantly, it reveals the risk in reversing government stimulus too soon. What damage will we do to employment if we flip straight back to the old path of this chart? As Reserve Bank deputy governor Guy Debelle said to the Standing Committee on Economics: “Don’t remove the stimulus too early … some European economies in particular last time did pull back … that didn’t serve them too well.”

Peter Fray

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