How Australians are spending their COVID-19 stimulus payments: ABS

How Australians are spending their COVID-19 stimulus payments: ABS

People receiving a government payment during the pandemic spent it on household essentials, including paying bills, buying groceries or saving it for a rainy day, according to new research from the Australian Bureau of Statistics.

The findings, gleaned from a phone survey of 2600 people over a fortnight in May, offer an insight into what people were spending their stimulus money on and the pandemic safety practices they were adopting, Michelle Marquardt said, head of household surveys at ABS.

“People were most likely to use the May stimulus payments to add to savings (29 per cent); pay bills (28 per cent); and purchase food and non-alcoholic drinks (12 per cent),” she said.

About 47 per cent of people under 65 years old were more likely to put the money towards their mortgage, bills and other debts, but this rose to 63 per cent if they were unemployed.

The largest percentage of people saving money were over 65 years old. About 37 per cent added the payment to their savings, while 39 per cent used it to buy food and furnishings.

Life, in the age of COVID-19

The majority of Australians were helping fight the spread of the COVID-19 pandemic by adopting safe practices, the survey found. 

About 95 per cent exercised social distancing, 77 per cent cancelled personal gatherings and 75 per cent avoided public spaces. 

The data generally identified more people born overseas took precautionary measures in dealing with the pandemic than those born in Australia. 

“There were interesting findings comparing the actions of people born overseas and those born in Australia,” Ms Marquardt said.

In the four weeks leading up to the survey, those born overseas wore a mask at least once (42 to 20 per cent), avoided public transport (62 to 49 per cent), and purchased additional medical supplies (24 to 15 per cent).

Around the country

The percentage of people receiving government stimulus payments throughout the month of March varied across the country. 

Almost one in two -- 47 per cent -- of people in Tasmania received a stimulus payment. South Australia and Queensland followed at 39 and 37 per cent respectively.

The survey found 36 per cent of women received a stimulus payment compared to 27 per cent of men.

It also found Australians without a school qualification were more likely to be a recipient at 41 per cent, compared to those who had a qualification at 27 per cent.

Government stimulus scheduled to roll back

The Federal Government has announced the JobSeeker stimulus payment will begin to taper away in September, but also announced a $15.6 billion expansion to the JobKeeper payment as Victoria enters a second phase of lockdowns. 

The $1100 JobSeeker payment, part of a $14 billion package scheduled over six months, is expected to taper down to $800 a fortnight in September.

The payment has been credited by banks, analysts and industry groups with helping to cushion the economic downturn brought by the sweeping COVID-19 virus, a pandemic that has brought on the most severe recession in Australia since the 1930s. 

Out of the $15.6 billion extension to the JobKeeper package, about $13 billion will go to Victoria, as the state copes with the strict trading restrictions of a stage 4 lockdown.

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Learn more about savings accounts

How can I get a $4000 loan approved?

While personal loans and medium amount loans don’t offer guaranteed approval, there are steps you can take to help increase the likelihood of your application being approved, including:

  • Fulfilling the eligibility criteria (providing ID, proof of residency, proof of income etc.)
  • Checking your credit history (you can order one free copy of your credit file per year, and make sure that there aren’t any errors that may be bringing down your credit score)
  • Comparing carefully before applying (making multiple loan applications can mean having your credit checked multiple times, which can look bad to some lenders and reduce your chances of being approved by them)

Can you set up direct debits from a savings account?

It’s not usually possible to set up a direct debit from your savings account to cover ongoing expenses or bills, as savings accounts are structured around growing your wealth by earning interest on regular deposits, and discouraging withdrawals.

Some transaction accounts allow you to set up direct debits and also earn interest, though you may not enjoy as much flexibility as a dedicated transaction account, or get as high an interest rate as a dedicated savings account.

How do I open a savings account?

Opening a savings account is a relatively simple process. If you’ve found an account with a suitable interest rate, you’ll just need to get in contact with your chosen lender via a branch, phone call or hop online to begin the process. 

You may be required to provide:

  • Personal details, including identification (driver’s license, passport etc.)
  • Tax file number
  • Employment details

What is a good interest rate for a savings account?

A good rule of thumb to keep in mind with savings accounts is to look for a rate that is higher than the CPI inflation rate. This number is constantly changing, so check the Reserve Bank of Australia’s page. If you aren’t earning interest above this then the value of your money will go backwards over time.

How to open a savings account for my child?

Some banks and financial institutions allow parents to open a bank account for their child as soon as it is born, and start depositing funds to go towards the child’s future.

Children’s savings accounts generally don’t have fees, and are structured to help develop positive financial habits by limiting withdrawals, encouraging regular deposits, and earning interest on the savings, similarly to standard savings accounts.

Who has the highest interest rates for savings accounts?

As banks frequently change their rates, the most accurate way to know who currently has the highest interest rate is to use a savings account comparison tool.

How does interest work on savings accounts?

The type of interest savings accounts accrues is called compound interest. Compound interest is interest paid on the initial deposit amount, as well as the accumulated interest on money you have. This is different from simple interest where interest is paid at the end of a specified term. Compound interest allows you to earn interest on interest at a higher frequency. 

Example: John deposits $10,000 into a savings account with an interest rate of 5 per cent that he leaves untouched for 10 years. At the end of the first year he will have $10,512 in savings. After ten years, he will have saved $16,470.

What is the interest rate on savings accounts?

As banks frequently change their rates, the most accurate way to look at interest rates on savings accounts is to use a savings accounts comparison tool. When you look at the savings rate check what the maximum and minimum rates are. Often banks will offer you a promotional rate for the first few months which is competitive, but then revert back to a base rate which can sometimes be less than inflation. Ongoing bonus rates are often a safer bet as they will keep rewarding you with the maximum rate, provided you meet their criteria

Can you direct deposit to a savings account?

Yes. You can make one off payments or set up regular direct deposits into a savings account. This can be organised easily through online banking or by making deposits in a branch. Talk to your lender to find out the easiest way for you to set up direct deposits.

What is a savings account?

A savings account is a type of bank account in which you earn interest on the money you deposit. This makes it one of the easiest and safest investment tools.

Can I overdraft my savings account?

A lot of savings accounts won’t let you overdraw. Some will allow this feature but you’ll need to apply first. It’s best to read the fine print and check with your lender whether this is a feature they offer. It can be a helpful addition, but as your lender can charge you a fee as well as interest for going into negative numbers, it’s best to avoid overdrafting when possible.

Can you have a joint savings account?

Yes. Joint savings accounts can be useful for two or more people wanting to combine their savings to meet shared financial goals, including spouses, flatmates and business partners.

Some joint savings accounts require all parties to sign before they can access the money. While less convenient, this extra security can help encourage all parties to meet their shared financial goals.

Other joint savings accounts allow any of the account holders to access the money. These accounts can be convenient for financially responsible couples that trust one another implicitly. 

How to make money with a savings account?

Savings accounts make you money by earning interest on your savings. The more money you deposit, the longer you leave it in the account, and the higher the account’s interest rate, the more interest you’ll be paid by the bank or financial institution, and the more your wealth will grow.

To make sure your savings account makes money and doesn’t lose money, it’s important to maintain a large enough minimum balance that the annual interest earned exceeds any annual fees charged on the account.

How much money should I have in my savings account?

A good rule of thumb when working out a minimum balance for your savings account is to make sure that you’ll earn more in annual interest on your savings than what you’ll be charged in annual fees.

If you’re saving with a specific goal in mind, prepare a budget so the interest you earn on your deposits will help you efficiently reach this goal. Online financial calculators may be helpful here.