Some of the value people lost in superannuation, shares and savings due to the COVID-19 pandemic has been recovered, quarterly figures reveal, but a larger rebound was held back by falling property values.
A recovering economy helped the average household’s wealth go up by $5881 in the June quarter, figures from the Australian Bureau of Statistics (ABS) reveal, but the 1.4 per cent lift wasn’t enough to offset the 3 per cent fall that took place in the March quarter.
"The June quarter 2020 financial accounts reflect the recovery of the Australian and international financial markets as the economic impacts of COVID-19 became more evident, and government and RBA policies took effect,” Amanda Seneviratne said, the head of finance and wealth at the ABS.
The average person’s wealth is now estimated at $433,833, the ABS said, and it has been buoyed by a 3 per cent recovery in shares, 2.7 per cent increase in deposits, and a 5.4 per cent lift in superannuation balances.
The increase in superannuation values would not include the full $33.3 billion withdrawn to date from people’s accounts under the government’s early release of superannuation scheme, a financial relief measure instituted to offset the financial shock of COVID-19. By the end of the June quarter, about $18.1 billion had been withdrawn, preceding a wave of people double dipping.
House values trail, but a large recovery is anticipated
Falling property prices offset the returning confidence in savings and halted a larger recovery, the ABS said. Residential home values fell 1.2 per cent over the June quarter.
“The holding loss on residential assets reflected widespread falls in property prices due to a combination of social distancing measures (restrictions on auctions and open house inspections) and ongoing economic uncertainty,” the nation’s statistical agency said.
Property prices have fallen across the nation by 1.7 per cent in the most recent quarter, CoreLogic said, led by falls in Melbourne of 3.5 per cent and Sydney of 2.1 per cent.
Economists project falls of 5 to 6 per cent across the country as of next year, riding out predicted ‘urgent’ sales of houses due to distressed mortgages, before a strong recovery of 15 per cent is forecast to take place.
Savings bunkers offer peace of mind
People are saving more and spending less due to the uncertainty brought about by the pandemic, the ABS said.
Household deposits jumped by $33.4 billion during the June quarter, driven by government income support packages such as JobKeeper, JobSeeker and early access to superannuation.
The rise in deposits comes as 932,000 jobs were lost during the March and June quarters, according to the ABS.
Households have been stockpiling savings as a way to financially protect themselves from the volatile climate created by the pandemic. IBISWorld estimates savings as a portion of disposable income jumped from 2.7 per cent to 7.9 per cent for the financial year ending in 2020.
And people are expected to hold the savings buffer for a few years, the research firm said.
“As with the post-GFC recovery, savings are likely to remain at elevated levels for at least the next three years,” they said, adding: “Consumers are likely to spend cautiously as they did after the GFC.”
Consumer confidence shows signs of returning
The more people hold on to their money, the less they’re likely to spend it.
It doesn’t present harm in the short run, a big bank executive said, but a return to buying from businesses will help the country climb out of its first recession in almost three decades.
“People are not spending as much, that’s a COVID impact. People are putting money into their bank deposits,” Peter King, chief executive of Westpac, recently told a parliamentary committee.
“As an economy, we’d like more activity and spending … Over time we’d like to see the activity driver.
“Lower consumption means less activity for businesses. That’s one of the challenges we have in the economy at the moment.”
Consumer confidence is returning, according to a sharp monthly rise in the Westpac-Melbourne Institute Index of Consumer Sentiment, though it still is fractionally behind pre-pandemic levels.
The survey of 1200 adults found consumer confidence experienced a monthly jump of 18 per cent in September to 93.8, renewing people’s optimism when it comes to buying property, saving money or looking for a job.
“Consumer confidence is returning to more normal levels,” Bill Evans said, chief economist at Westpac.
“Although, the sensitivity to progress in managing the virus and the opening up of economies remains key to the outlook.”