ADVERTISEMENT

Australians’ Swelling War Chests, Pent Up Demand Augur Big Spend

Australians have salted away cash they’ve been unable to spend, leaving them well placed to drive a recovery.

Australians’ Swelling War Chests, Pent Up Demand Augur Big Spend
Property in the suburb of Rhodes stands across the Parramatta river from apartment buildings in the suburb of Wentworth Point in Sydney, Australia. (Photographer: Brendon Thorne/Bloomberg)

Australians have salted away cash they’ve been unable to spend on leisure activities due to the Covid lockdown and paid down debt, leaving them well placed to drive a recovery once the virus is contained.

The nation’s savings ratio soared to a 46-year high of 19.8% in the three months through June and would’ve stood at almost 25% if pension-fund withdrawals had been included. Data show spending on activities people couldn’t engage in because of restrictions tumbled 30.5% last quarter. Those still open for business advanced 1.2%, suggesting an appetite to consume remains.

Australians’ Swelling War Chests, Pent Up Demand Augur Big Spend

Rebecca James, CEO at Flexigroup, a fintech firm heavily geared toward buy now and pay later purchases, said a major focus of consumers has been on fixing household balance sheets.

“There’s been a lot of talk around on what people have used the money they’ve taken from superannuation and the government stimulus,” she said in an interview. Outside higher spending at supermarkets around the lockdown period, “the next biggest category in terms of what people have been using that stimulus for is in repaying debt.”

Australians’ Swelling War Chests, Pent Up Demand Augur Big Spend

Household consumption accounts for 56% of Australia’s economy and last quarter it tumbled 12.1%, driven by a collapse in spending on transport -- such as airlines -- and hotels, cafes and restaurants.

With much of that cash saved and fiscal and monetary authorities pumping stimulus into the economy to revive it, the key missing ingredient is a belief that the health risk is now at least manageable.

What Bloomberg’s Economists Say

“The savings stockpile has wound up in a surge of household deposits, which -- once restrictions ease and confidence returns -- has the potential to flow through to a powerful initial surge in spending.”

James McIntyre, economist

Flexigroup’s James notes that one area that did very well during the Covid restrictions was sales related to the home and home improvement.

“Australians have been very productive in lockdown in terms of ticking things off their list,” she said.

©2020 Bloomberg L.P.