COVID-19 hit many Australians hard, but there were winners in the pandemic economy
In June of last year, Mickayla Downey and Matthew Hardiman had a plan: move in with the parents, save on rent and build a deposit for their first home.
Then two COVID-19 lockdowns hit Melbourne and something unexpected happened: their savings grew much faster than anticipated.
The newly engaged couple were lucky enough to keep their jobs and consistent pay cheques.
And for months during lockdown, their spending dropped dramatically.
“A weekend away can cost you a thousand dollars,” Mr Hardiman said. “Instead of putting that money to a trip, we just put that straight into a savings account.”
And those savings added up fast.
Ms Downey, 26, and Mr Hardiman, 29, estimate they saved $35,000 due to lifestyle changes through COVID.
By December, they were in the market for their first home. And they had lots of company.
“The houses were going really, really quick,” Ms Downey said.
“So every time we’d look at a house, it was two, three days and it was marked as settled.
“Everything was going above the asking price.”
The couple also ended up paying over the asking price when they purchased their first home in Pakenham, in Melbourne’s outer east — and they believe it was a result of the spending changes brought on by COVID-19.
“That was the whole reason we could afford the house, was because we could save that money during that period,” Ms Downey said.
Average households ‘better off’
With JobKeeper and the Coronavirus supplement set to end next month, many are bracing for the financial fallout.
But there are also signs that many Australians have seen an unexpected boost to their household bottom lines during the COVID pandemic.
In December, the number of new loan commitments to owner-occupier first-home buyers soared to 15,205 — 60 per cent more than a year earlier.
And it’s not just homes that are selling.
Household goods, cars, and home renovations are just some of the categories on the upswing.
“The average household is definitely a chunk better off,” Sarah Hunter, chief economist with BIS Oxford Economics, said.
“A lot of people are probably looking at their bank balances and can see a bit of cash sitting there that they weren’t expecting to be sitting there this time last year.”
Ms Hunter pointed to the household savings rate, the measure of the percentage of household disposable income saved every month.
In June last year, after the first wave of COVID lockdowns, it surpassed 22 per cent — its highest level in more than 60 years.
It remains close to 20 per cent.
“To put that into context, pre-pandemic it was more like 5 per cent, so it’s a huge increase,” she said.
“Generally across the country, there’s also a lot of activity we couldn’t do, and so there we just had a whole glut of spending that couldn’t take place.
“And that’s really what drove the savings rate up.”
And when savings build up, spending is never far behind.
Some of the ‘best times I’ve seen’
In John Buskes’ case, the spending has led to a “boomtime”.
Mr Buskes, the owner of A1 Motorcycles in Ringwood outside of Melbourne, originally thought COVID-19 was going to shut his business down.
“No-one’s going to Bali and no-one’s going to Athens right now, or going to New York or Paris,” he said.
“They’ve definitely decided they’ll use that money for something else.”
Mr Buskes, who has been in the business for 36 years, said he’d never experienced anything like he did in July and August.
“Some of the best times I’ve ever seen in this business in terms of selling,” he said.
“We speak to a lot of other dealers and everyone seems to be in the same boat. I think from Cairns to Perth and from here to Hobart, it’s been going very, very well.”
End of JobKeeper the next test
Even businesses that struggled through much of 2020 are starting to see turnrounds.
Matthew Venn is the managing director of Sanctuary Makers, a one-stop bathroom and kitchen renovation showroom that opened in early 2020 — just as the COVID-19 economic slowdown took hold.
“It was very tough,” he said.
The business is the retail side of the country’s largest decorative tile manufacturer, which also struggled as projects dried up early in the pandemic.
“But we are actually also starting to see some early signs that people are renovating more.
“They’re more interested in actually decorating their homes. And, of course, that means tiles,” he said.
Some of those tiles are part of a bathroom renovation underway at Adrian Baltruschaitis’ home in Melbourne’s south-east suburbs.
“My wife has always been asking for a bathroom for the last sort of six or seven years, and then COVID came along and I thought I’d start pulling it apart and have a crack at it myself,” he said.
He and his wife and their two boys would typically spend $5,000 to $6,000 on an overseas holiday.
Not last year.
“We normally head off to Bali or Thailand or something once a year,” he said. “But then we thought, oh, let’s finally get that bathroom done that we’ve always talked about.”
According to BIS Oxford chief economist Sarah Hunter, what is not clear is how long this spending spree will last.
“A lot of those government support measures are going to roll off through the next couple of months,” she said.
“And so for some households that might have had a little bit extra coming in, that’s probably going to reverse.
“The big question is to what extent and how quickly does that happen? And that’s what people like me, the RBA and others are really grappling with in terms of the outlook for this year.”