Earlier this year, economists were predicting that the Australian economy was about to fall off a cliff. JobKeeper was coming to an end last March, and many believed tens of thousands of small businesses would collapse.
It didn’t happen. Jobs rebounded, businesses survived and the economy looked in amazing robust good health. House prices soared, and so did the stock market.
What could possibly go wrong?
Fast track to today. Back in lockdown and with no JobKeeper, economists are back in gloom mode. And so they should be.
Things are looking even more dire than they did in March. The Delta strain of COVID 19 has Australia by the throat, and there is no clear path forward.
The iron ore boom, fuelled by China an which carried WA and much of the Federal economy, is now looking precarious, thanks to our rancorous relationship with out huge Eastern neighbour; wage growth is depressed, job figures are down (despite the dodgy figures issued by Canberra which don’t take account of those who have given up looking) and banks are holding tens of thousands of mortgages with paused repayments.
We’re not saying Australia falling off a cliff. But we are certainly looking over the edge.
But nothing is quite right in the weird and wacky world of COVID economics.
ME bank recently carried out a survey of 1,500 households. Here are the key takeouts:
- The financial comfort of the average Australian household has improved to record levels.
- Comfort with cash saving reached an all-time high – though nearly a quarter of households can only maintain their lifestyle for up to a month if they lost their income.
Weird, isn’t it. Almost all 11 measures underlying the ME Bank’s Household Financial Comfort Index improved to record levels.
Notably comfort with net wealth (up 5 per cent to 6.21), cash savings (up 1 per cent to 5.83), investments (up 3 per cent to 5.67 to about 14 per cent above its historical average) and comfort with expected retirement (up 8 per cent to 5.82).
Savings remain at very high levels; albeit a large proportion of households have little if any savings to manage an emergency (such as COVID or the loss of income or job).
Saving levels continued to increase, along with the average amount saved to a record $960 in June 2021. AND the average amount overspent each month dropped dramatically to $483 in June 2021 – the lowest amount since December 2018.
Comfort with the ability to cope with a financial emergency also improved 1 per cent to 5.69 per cent – a record high and 18 per cent more than pre-COVID levels.
BUT despite these new records, 21% of Australian households reported less than $1,000 in cash savings in June 2021 – down 6 percentage points than prior to the pandemic.
Of these, 9 per cent of households have less than $100, 7 per cent ($100 to less than $500)
and a further 6 per cent ($500 to less than $1,000).
Currently, 24 per cent of Australian households report that if they lost their incomes, they would be able to maintain their current lifestyle for only 1 month, with 11 per cent only able to maintain their current lifestyle for two weeks – or the equivalent of a short COVID lockdown.
Let’s move on to pay. If you haven’t had much of a pay rise in the last few years, you arenot alone. Particularly if you are female.
Many economists have been surprised that wages have continued to fall, despite a skills shortage and the fact that our closed borders mean foreign workers are no longer competing for jobs.
Even worse for women. Average pay fell 1.3 per cent over the past year.
So what’s the prognosis? The September quarter will be bad.
Retail fell by 1.8 per cent in a month. Building firms may go under with thousands of jobs lot if the NSW lockdown is extended.
The Commonwealth Banks expects Gross Domestic Product to contract by 0.7 per cent in the September quarter – and the National Australia Bank’s chief economist Alan Oster agrees.
Governments have so far allocated around $5 billion in disaster support payments to businesses and households and has received over 518,000 requests for financial assistance from NSW alone.