COVID-19’S surprising side effect: reduced income inequity across Australia

The first real time analysis of impact and Federal government responses to the COVID-19 pandemic has shown a reduction in income inequity across Australia.

“The drop in the Gini index, which measures inequity, was 0.03 points between February and June 2020,” said Professor Brenton Prosser, Director of the National Centre for Social and Economic Modelling (NATSEM).

“To put this in perspective, we saw more change in three months that we would normally see in three years.”

Utilising cutting edge ‘nowcasting’ economic simulation methods, the research is the first in the country to use near real time data to complement observed data to estimate changes in national household income distribution due to COVID-19.

According to NATSEM, these unexpected findings are temporary, and due to Federal government policies like the JobKeeper and JobSeeker payments.

“The story behind these figures is that without government intervention, disposable incomes would have plunged considerably, with severe consequences for income inequity and poverty levels,” said lead researcher Professor Jinjing Li.

The NATSEM team incorporated three unique Australian datasets into the nowcasting method – the Australian Bureau of Statistics (ABS) monthly Labour Force Survey results, weekly payroll statistics data for between February and June 2020, and biannual income/housing surveys.

The team also analysed the impact of JobKeeper, JobSeeker and the COVID-19 childcare subsidy payments using the centre’s own STINMOD+ model.

NATSEM’s modelling found that the hardest blow to jobs nationally came in April and May 2020, when more people from the lowest 20 per cent of households lost employment.

In terms of monthly disposable income, NATSEM’s analysis of what could have been estimated a decline by 3 to 4 per cent for the lowest households, and up to 10 per cent for the second lowest 20 per cent – instead, disposable income grew by between 9 and 24 per cent across the lowest two groups.

“We initially estimated that the household income shock caused by COVID-19 would have seen a maximum of between 15 and 26 per cent decline in income across all groups. Instead, there was an increase of up to 24 per cent in monthly gross income in the lowest 20 per cent of households, and up to 8.4 per cent across all others,” Professor Li said.

Professors Li and Prosser both feel that the shift in income inequity is notable.

“Usually, the practical challenges of quickly collating and assessing rigorous data present a constraint for urgent policy response – while the impacts of crises are immediate, the results of robust analysis are often years away,” Professor Prosser said.

“This research provides important additional evidence for political leaders, as they face key policy decisions in coming days, weeks and months.”

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