How households plan to spend their savings in the event of a pandemic

Household spending is at its lowest since the Delta shutdowns, with Sydney and Melbourne lagging the national average.

The Commonwealth Bank estimates that consumer spending already fell around 3% in January due to the latest spike in COVID cases. A week ago, ANZ rated consumer confidence 2.2% lower than in mid-December, while the ‘time to buy a major household item’ score was 4.9% lower.

As many have pointed out, the fight against the virus is not a choice between economics and public health – economics relies on public health.

The bigger question remains what our spending habits will look like after the immediate crisis is over. Will Mr Frydenberg be belatedly correct that Australians will fuel the recovery by spending their accumulated savings?

As the virus recedes and people are able to get out and about, consumers are likely to start spending again. We’ve seen this pattern a number of times between lockdowns.

But even if people return to their pre-pandemic spending habits, it could just slow or stop the pace of new economies. This does not mean that they will also spend the money they have already raised over the past two years.

Australians interviewed by The Herald of the Sun and Sunday age have other plans for that money.

For those who intend to increase their spending, two themes are common. The first is international travel, which does not entirely benefit the Australian economy. The second is home renovation, which only benefits a specific sector.

Meanwhile, the imperative to save for a home or for retirement has not gone away – in fact, the housing boom means it has only intensified.

However, Belinda Allen, senior economist at Commonwealth Bank, said young Australians have been less able to save during the pandemic than Gen Xers and baby boomers.

By December, home buying intentions had fallen from a year earlier as affordability began to bite.

Savers

James Pearce and his wife Karla Quintana, like many Australians, are saving up for a house.

The couple, who are in their 40s and have three children, rent in the Bankstown area. They moved to Mr Pearce’s hometown of Sydney from Ms Quintana’s native Mexico in 2019 and lived off their savings for about a year while Mr Pearce retrained and looked for work. They own a home in Mexico, but traveling there to sell the property is inconvenient during the pandemic.

Mr Pearce eventually landed a job, then a new, better paid one that could be done remotely during Delta’s long lockdown in New South Wales.

Ms Quintana also found a job just before the same lockdown and qualified for JobSaver when she had to stop working.

The family saved money because the lockdown meant they had to forgo family outings to the cinema and a planned trip to the NSW snowfields, and couldn’t travel to see relatives on the north coast of NSW.

“It was nice to have that buffer again,” Mr. Pearce said. “We’re pretty much going to keep saving because we want to expand that reserve and at some point we’re looking at buying a house rather than relying on the rental market. It will take some time before we can pay the deposit due to the price of the property at this time.

Mr Pearce said the Treasurer’s call for Australians to spend their savings was “ridiculous and dishonest”.

“You get both arguments, don’t you?” When people said ‘we can’t post a deposit on a house’, [other] people say ‘well you just can’t go out, can’t eat out, you have to save your money for the deposit,’ Mr Pearce said.

“And then they turned around and said, ‘Wait, everyone has too much savings, you have to go out and spend it’. We can’t do both.

The business owner

Anushka Bandara, from southeast Melbourne, has saved at least $10,000 a year by not traveling overseas.

Mr. Bandara, who is co-founder and managing director of app developer Elegant Media, would normally spend much of his time visiting its international and interstate offices, staff and clients, as well as traveling for pleasure. and for personal reasons.

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Repeated closures in 2020 and 2021 also weighed on its spending on entertainment and social activities, such as restaurants, which were not offset by additional spending on takeout and subscription streaming platforms.

“During the lockdown the business was unaffected so nothing changed in terms of income but expenses were reduced as there was no way to spend your money,” he said. he declares.

Mr Bandara, who is married with a young daughter, said he would use some of the savings for home improvement projects and a trip to visit relatives in Sri Lanka.

He also plans to reinvest much of his savings back into the business to capture the growth of artificial reality, the metaverse, and games.

Mr Bandara said people are unlikely to spend money outside the home or travel when the virus is a threat because they don’t want to risk getting sick or having to s ‘isolate.

The investor

Christina Gretton, from Ryde in Sydney, has been ‘locked down’ for most of the pandemic, only spending money on groceries and other essentials.

Since her income was not affected, she ended up with thousands of dollars in additional savings.

Ms Gretton said she received quotes for renovations to the house but delayed her plans because builders were busy and building materials were scarce.

Given the low bank interest yields, she decided to invest the money in stocks for the time being.

As a young woman, Ms Gretton saved a down payment for her first unit by investing in stocks after her grandmother encouraged her to learn more.

She decided to try to pass on this knowledge by also investing in stocks for her teenage daughters, aged 14 and 17.

Ms Gretton uses an app and has the children’s accounts as sub-accounts to save on fees, but intends for them to take over when they turn 18.

“I showed them the app because it shows fund movements – it’s very simple, it’s very graphical and you can see how your fund is tracking,” Ms Gretton said.

“I show them this because I want to build their understanding of how the stock market works, so that when they start making money, they’ll see the value in investing their money rather than just spending it.”

the spendthrift

Kay White and her husband from central west Sydney usually make an annual trip to Ireland to see family, but they haven’t been since Christmas 2019.

Even if they stay with family and friends, the cost of flexible flights, travel to Ireland, spending money and insurance could easily add up to $10,000 for the two of them.

For the first 18 months, the couple went nowhere and spent almost nothing. However, for the past six months they have been traveling to Australia instead.

In June, before Delta’s long lockdown, White took a trip to the Northern Territory to hike the Larapinta Trail, and her husband joined her afterwards to visit Alice Springs and Kings Canyon.

Then in November, the couple stayed at the exclusive Gaia Retreat & Spa in Byron Bay, which cost around $8,000 for five days. Ms White said they couldn’t find accommodation in Byron for less than $400 or $500 a night, without breakfast, and they didn’t want to self-cater, so they decided to do madness.

“It was really nice. We wanted to stay somewhere with really good food and we liked to do yoga every morning and even though the weather wasn’t great it was lovely,” she said .

“Not a vacation we would normally take, but it was comparable in cost to a trip to Ireland.”

The couple also plans to build an outdoor entertaining space at the house.

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