Young and low-income most likely to spend $750 coronavirus stimulus payments: ANZ economists
Younger Australians and low-income earners were most likely to boost their spending after getting a $750 stimulus payment from the Federal Government this year, ANZ economists say.
People aged over 60 were least likely of any age group to boost their spending after receiving a payment.
ANZ’s economics team has analysed the internal card data of their bank’s customers to see how Australians responded to the Government’s two rounds of $750 emergency stimulus payments this year in April and July.
They said the data showed the higher sensitivity of spending behaviour for lower-income earners and younger cohorts suggested direct household support for these groups “would stimulate consumption more than support for other groups”.
After breaking down the spending patterns of customers this year by age, income bracket, and whether they received at least one $750 payment, ANZ’s economists found three main behavioural patterns.
Younger recipient, bigger spend
Firstly, they found recipients of at least one $750 cash payment were more likely to increase their spending in July than others in their age group who did not receive a payment.
The younger a recipient was, the more likely they were to spend more.
According to the data, the average monthly spending for a 15- to 29-year-old who received at least one $750 cash payment increased by 51 per cent in July when compared to their spending level at the same time last year, while spending for those in the same age group who did not receive a cash payment was up by just 9 per cent.
The data also showed strong growth in spending for those who received a cash payment among people aged 30-44 (34 per cent higher) and 45-59 (25 per cent higher).
However, spending by Australians aged 60 and older did not return to pre-pandemic levels in July, regardless of whether they received a $750 payment or not.
For Australians aged 60-74, the data showed spending grew by just 4 per cent in July (compared to July last year) among those who received at least one cash payment, while it actually shrank by 5 per cent for those who did not.
Higher-income earners cut back most
Secondly, ANZ’s economists found higher-income earners reduced their monthly spending by more than any other income group in April and May, and their spending recovered the least of any income group in June and July.
“This may be because discretionary spending by higher-income earners was more affected by lack of opportunity (due to lockdown restrictions and border closures), whereas lower-income earners had a relatively smaller share of discretionary spending to begin with,” wrote ANZ economists Adelaide Timbrell, Arun Navaratna, and David Plank.
Young people still spending
Thirdly, they found among Australians who did not receive a $750 cash payment this year, those aged between 15-29 still increased their average monthly spending by more than any other age group.
The economists speculated that could have been a consequence of the fact many younger Australians have seen their incomes increase temporarily under the Government’s other emergency stimulus measures.
“Younger workers were more likely than other workers to be stood down or receive JobKeeper in lieu of their normal wages, and some of these workers received a pay-rise due to the JobKeeper scheme,” the economists wrote.
“This may explain the rise in spending by this group.
“[Customers] who earned less than $650 per week spent more on average in July 2020 than pre-pandemic months.
“These cohorts reduced their spending the least during April, before the economic support payments, JobKeeper and the JobSeeker COVID-19 supplement were paid.”
Government’s about-face on ‘cash splash’
Back in March, when the Government first locked down the economy and its original stimulus package was starting to take shape, senior Coalition ministers were keen to avoid comparisons between their stimulus plans and the Rudd government’s stimulus packages from 2008-09.
At one stage, the Finance Minister Mathias Cormann told Sky News there would not be any Kevin Rudd-style cash payments for everyone.
“We will not be pursuing a cash splash in the reckless Rudd-Gillard fashion, no,” Mr Cormann said.
However less than a week later, the Government announced more than 6.6 million welfare recipients, including pensioners, carers, veterans, families, young people, and jobseekers would get a one-off cash payment of $750 from March 31, costing $4.8 billion, as part of a $17.6 billion package.
Prime Minister Scott Morrison said the “biggest beneficiaries” of the payments would be pensioners.
“They comprise around half of those who will receive those payments,” he said.
Two weeks after that, Mr Morrison announced a second round of $750 cash payments to be paid from July 13, for about 5 million people costing $4 billion, as part of a much larger stimulus second package worth $66 billion.
By July, the Government had provided $289 billion in fiscal and balance sheet measures, and the extra government spending required to account for the rapid deterioration in private sector spending had contributed to an estimated budget deficit of $85.8 billion in 2019-20, and $184.5 billion in 2020-21.