Government support for business

Released
2/09/2020

The government’s economic response to the COVID-19 pandemic included the introduction of JobKeeper and the Boosting Cash Flow for Employers policy. These payments are classified as ‘other subsidies on production’ (for further information on the classification of these policies, see Economic measurement during COVID-19: Selected issues in the Economic Accounts (cat. no. 5261.0).

Other subsidies on production rose to record levels, reaching $52.0 billion in the June quarter. JobKeeper payments accounted for $31.0 billion and Boosting Cash Flow for Employers contributed $16.0 billion. Other COVID-19 related subsidies, including those made by state governments, added an additional $3.6 billion. JobKeeper and boosting cash flow for employers are the largest and second largest subsidies ever recorded in the national accounts.

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JobKeeper payments by industry

JobKeeper supports businesses adversely affected by the COVID-19 pandemic by subsidising the cost of wages.

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The largest amount of JobKeeper payments was distributed to large employing industries such as Construction, Health Care and Social Assistance, Professional, Scientific and Technical Services and Accommodation and Food Services.

JobKeeper payments relative to compensation of employees (COE) were highest in the Arts and Recreation Services industry accounting for 48.6% of COE and the Accommodation and Food Services industry (45.0%).

Boosting cash flow for employers by industry

In addition to JobKeeper, the government introduced the Boosting Cash Flow for Employers policy to provide temporary cash flow support for small and medium sized businesses and not-for-profit employers.

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Industries with a large share of small and medium sized businesses received the largest portion of the total Boosting cash flow for employers payment. These industries included Construction and Professional, Scientific and Technical services.

Boosting Cash Flow for employers payments relative to operating surplus were highest in the Other services (32.8%), Accommodation and Food Services (31.0%) and Administrative and Support Services (24.7%) industries.

Taxes less subsidies on production and imports

Taxes less subsidies on production and imports fell a record 111.9%, reflecting a large rise in subsidies on production and imports, up $49.7 billion or 859.7%. The rise in subsidies was driven by JobKeeper and Boosting Cash Flow for Employers as noted above.

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Subsidies on production and imports are unrequited payments that government make to businesses to carry out production activity. These payments can be used by businesses to fund labour costs, operating expenses or retained in operating surplus.

Government support to business through payment of subsidies resulted in a strong rise in profits. Hours worked fell a record 9.8%, outpacing the 2.5% decline in wages which was supported by JobKeeper payments.

Shares in total factor income

The growth in profits coupled with the fall in COE resulted in the COE share of total factor income falling below 50% for the first time since the September quarter 1959.

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