AMP Capital Chief Economist Shane Oliver said that in addition to the extra money people will see in their weekly pay, many will get $ 900 through a tax refund already paid at the start of next fiscal year. when they do their annual income tax return.
He said there was no doubt that some of the money would be saved, but there was a good chance that a good percentage of the money would flow back into the economy via consumers.
“The savings rate is already very high and it’s hard to see it go up again. And Australians have paid off their debts at or near record levels anyway,” he said.
âAll of this suggests that a large portion will actually be spent, especially since the tax savings are permanent as opposed to a one-time payment.
“This in turn will help offset the negative impact on household purchasing power across the board from the decrease in JobKeeper and JobSeeker supplement payments.”
ANZ Australian economy chief David Plank said there were signs that people were increasingly concerned about their own financial situation, in part because of the decline in JobKeeper’s payments and JobSeeker.
“Some tax breaks will help in this regard and are therefore welcome. But the boost in tax cuts will be less than the cut in direct support, in this quarter and the first half of next year,” did he declare.
âOf course a lot of other stuff is happening, with Victoria opening up and the housing market being boosted by the strong signal from the RBA that interest rates will stay low for a number of years. this makes reading “tea leaves” even more complicated than usual. “
In its quarterly monetary policy statement released last week, the Reserve Bank – which lowered official interest rates to 0.1% and launched a program to buy $ 100 billion in public debt – underlined the importance of tax cuts for the global economy.
The bank estimates the cuts will cut household taxes by $ 24 billion over the next two years, much of it in 2021-22. This is in addition to the $ 250 payments to retirees and some other welfare recipients.
The bank believes consumer spending will be vital to Australia’s economic recovery, with the tax cuts needed to offset the expiration of temporary aids such as the JobKeeper wage subsidy.
“Some households have already built up significant financial pillows in recent quarters, and if economic conditions continue to improve, they may choose to tap into those pillows to finance their consumption,” he said.