Increased income support during COVID-19 was two times more effective at stimulating spending and reducing financial stress than the early release of superannuation.
Analysis of bank transaction data by economic research institute e61 found people who received the one-off $750 Economic Support Payment (ESP) and the $550 per fortnight JobSeeker Payment Coronavirus Supplement (JSP) spent relief payments quickly and mostly on withdrawing cash and essentials, such as groceries.
E61 Research Director Dr Gianni La Cava said ESP recipients spent 70 percent of the payment, and JSP recipients spent 58 percent of the extra support, over their first fortnight.
“Meanwhile, people who participated in the Early Release of Super (ERS) scheme spent 31 percent of the money they withdrew over the first two weeks,” Dr La Cava said.
He said as part of a submission to the Commonwealth Government COVID-19 Response Inquiry, e61 also analysed the Household, Income and Labour Dynamics in Australia Survey to assess the wellbeing impact of the financial support measures.
“Wellbeing temporarily improved for JSP recipients while the supplement was in place but the ERS scheme, despite being intended to target those in financial stress, did not lead to improvements in financial resilience or wellbeing, and nor did the ESP.
“Our research suggests that in terms of stimulating spending and improving wellbeing, the JobSeeker supplement was the most effective economic support payment deployed during the COVID-19 pandemic,” Dr La Cava said.
He said recipients spent the JSP Supplement and ESP quickly, with 20-25 percent of each payment spent on the day it was received, while the ERS was spent more gradually over the first fortnight.
“Notably, ERS had the biggest impact on aggregate spending because it was of larger value, on average.”
“The fact the JSP was the only payment to significantly improve recipients’ wellbeing may be because it made up 25 percent income for its recipients, compared with 19 percent for the early super release, suggesting it was better targeted at people on lower incomes.
“The limited impact of the early super release scheme on financial resilience or wellbeing suggests it was too broad.”
Dr Cava said between April and June 2020, e61 estimated that about 4.9 million people received the $750 Economic Support Payment, while 2.5 million received the $550 per fortnight JobSeeker Supplement and 2.4 million applied for early super release with an average $8,223 withdrawn.
He said the super release scheme, which allowed withdrawals up to $10,000, created an estimated $6.3 billion of extra spending between April and June 2020 compared with $2.7 billion for the economic support payment and $4.2 billion for the JobSeeker coronavirus supplement.
