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Aussies stash the cash as economy hits 3-decade low
Australians are holding more cash as the COVID-19 pandemic continues to have a negative impact on the Australian economy at large, the central bank has found.
Aussies stash the cash as economy hits 3-decade low
Australians are holding more cash as the COVID-19 pandemic continues to have a negative impact on the Australian economy at large, the central bank has found.
During his opening address of a parliamentary committee, the governor of the Reserve Bank of Australia, Dr Philip Lowe, explained that even a surge in online transactions has not stopped Aussies putting an additional $11 billion under the mattress.
“While COVID-19 has accelerated the shift to electronic payments, there has, paradoxically, also been record demand for banknotes. Some people seem to be wanting to keep some extra money at home,” Dr Lowe said.
The result has been that the stock of banknotes on issue has increased from $83 billion in February to $94 billion today.
Dr Lowe pointed out that the rise in consumers holding cash coincides with the first economic recession for three decades.
“We do not yet have the GDP data for the June quarter, but it will show the biggest economic contraction in many decades, likely to be around 7 per cent,” Dr Lowe said.
Although the governor quickly pointed out that the economy is still stronger than what was largely initially feared.
Despite the official unemployment figures rising, too, with over 1 million Australians now out of work, Dr Lowe noted it could’ve been worse.
“Similarly, while the labour market outcomes have been poor, they have not been as bad as expected. Hours worked were initially expected to fall by a staggering 20 per cent over the first half of this year. The actual fall has been around half of this, largely due to Australia’s initial success in containing the virus and the earlier-than-expected easing of some restrictions,” Dr Lowe said.
Looking forward, there is a high degree of uncertainty about the outlook, with Australia’s economic recovery depending upon how successful we are in containing the virus.
“In our baseline scenario, we are expecting the Australian economy to contract by around 6 per cent this year, and then grow by 5 per cent next year and 4 per cent in 2022.
“It is possible that we will do better than this if there is near-term success in containing the virus or there are medical breakthroughs. On the other hand, if we were to see further setbacks in containing the virus, the recovery would be delayed even further,” Dr Lowe concluded.
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