According to new Treasury data, households and businesses have stockpiled a wealth of $200 billion during the COVID-19 pandemic, having tightened their spending habits on the back of economic uncertainty in 2020.
The government is now hoping that this amassed wealth will drive economic recovery once the JobKeeper wage subsidy is wrapped up in March.
Treasurer Josh Frydenberg is confident that the $200 billion in savings is a direct reflection of the government’s “unprecedented” economic support.
“The unprecedented economic support provided by the Morrison government during the crisis means that, even as JobKeeper and other temporary emergency support measures taper off, a fiscal cliff is avoided,” the Treasurer has said.
“With an additional $200 billion sitting on household and business balance sheets compared to the start of last year, there is a huge sum of money available to be spent across the economy helping to create jobs and maintain the momentum of our economic recovery.”
The Treasurer hopes that the JobMaker Hiring Credit, personal income tax cuts and investment incentives will help ensure the economic comeback continues.
“Money is now being spent. We’ve seen a big jump in household consumption; we’ve seen strong retail numbers, and we know that the economic recovery is well underway.”
Earlier this week, the Treasurer said he remains hopeful that the “earlier than thought” rollout of the vaccine will help spur economic growth and boost the budget, following the impacts of the pre-Christmas Sydney lockdown and the latest three-day movement ban put in place across Brisbane.
In the mid-year economic and fiscal outlook (MYEFO), Treasurer Josh Frydenberg forecast Australia’s real GDP to grow by 4.5 per cent in 2021 following a drop of 2.5 per cent in 2020. The unemployment rate was predicted to peak at 7.5 per cent in the March quarter 2021, down from an expected peak of 8 per cent forecast in the 2020-21 budget.
Speaking about these assumptions on Tuesday, the Treasurer said that despite recent events, positive signs of economic recovery are already evident, with 85 per cent of the 1.3 million Aussies who either lost their jobs or saw their working hours cut to zero back at work.
He reiterated, however, that the uncertainty will likely linger for some time to come.
“The uncertainty has been a feature characteristic of the last year of the first global pandemic of this significance in more than a century. And I fear that the uncertainty will be there globally at least for some time to come.
“Yes, we’re optimistic with the rollout of the vaccine, but the virus is not going away; it’s there with us every day. It’s our ability to deal with the new cases that arise that will very much determine the speed and the trajectory of our economic recovery,” said Mr Frydenberg.
