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Timely data crucial for economic recovery

The spending tracker showed those receiving both the coronavirus supplement and the one-off $750 stimulus payment spent 39 per cent more than normal in the second week of May, while those receiving neither payment spent 18 per cent less than normal.

These timely interventions underscore the importance of government stimulus at moments of heightened economic uncertainty. During the 2008 global financial crisis, targeted stimulus payments helped prevent the Australian economy from recording two consecutive quarters of contraction, a technical definition of a recession.

The evidence from the spending tracker also proves the value of channelling stimulus payments to lower income earners, who are more likely to spend the proceeds – and stoke demand – than higher income people.

Many private sector firms including banks and utilities have also extended hardship assistance to households financially affected by the pandemic. This includes the deferral of mortgage payments, bills and rents. The scale of this “private-sector stimulus” is unprecedented and has also played an important role in supporting the economy.

In addition, the spending tracker has shed light on striking changes in consumer behaviour. The onset of the pandemic triggered a boom in online purchasing and a surge in demand for household services such as home delivery and subscription television. Many shoppers have shunned cash in favour of alternative payment methods such as tap cards or smartphones. This suggests the coronavirus lockdown will have a lasting influence on consumer habits.

Now the spending tracker points to a major policy challenge for the Morrison government. Several federal stimulus measures, including the JobKeeper wage subsidy and the coronavirus supplement, are due to be withdrawn later this year around the same time as some hardship measures extended to households by banks and utility providers.

Economist Andrew Charlton, a director of AlphaBeta and one of the creators of the spending tracker, warns that the economy is in danger of a “double whammy” if government support to households and the hardship measures provided by the private sector are withdrawn at the same point.

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The insights provided by the tracker suggest the government will need to carefully taper the withdrawal of household income support to prevent a damaging demand shock.

The spending tracker, and other real-time economic data sources, will be an important guide for government policy as the economy gradually recovers from the coronavirus fallout.

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