Aussie household savings balloon to $230b

The June quarter national accounts showed that Australian households were flush with savings, accumulating a whopping $162.5 billion of household income in the year to June 2021 – double the previous peak of $80.5 billion saved by households in 2015:

Household savings

Commonwealth Bank estimates that household savings will swell to $230 billion by the end of the year, which should prop-up consumer spending and bolster the economy once it emerges from lockdowns:

Commonwealth Bank estimates will balloon to $230bn by the end of the year.

“This extra savings and the ­income being provided by the government should help the economy recover in 2022 and beyond,” CBA chief economist Stephen Halmarick said.

He noted that a surge of welfare payments had flowed in recent weeks into bank accounts.

The rise in savings has been driven by ‘COVID-19 Disaster Payments’ paid primarily to residents in NSW and Victoria, which have flowed into bank accounts:

Because of lockdowns, these residents have been unable to spend, which has resulted in incomes exceeding expenditure:

The upshot is that there is massive pent-up supply of unspent stimulus in the form of household savings that is available to be spent across the economy once lockdowns end.

My view is that this will drive a robust rebound in consumer spending; albeit not as strong as the rebound experienced last time. This is because unlike last time around, the virus won’t be eliminated and will continue to circulate around the economy. I discussed these issues yesterday.

Unconventional Economist

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