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:
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.
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