It sounds paradoxical but Australians are, on the whole, making more money than ever as the country lurches through lockdown and the economy shrinks.
Australian incomes have surged “very quickly” in New South Wales and Victoria in recent weeks as government support payments start hitting savings accounts, according to new analysis by the Commonwealth Bank.
The “counterintuitive dynamic” comes as jobs and spending in both state economies – representing more than half of Australia’s GDP – shrink and push the nation towards a sharp contraction after more than a year of strong growth.
“At an aggregate level the reduction in household income from job losses to date in New South Wales and Victoria has been more than offset by an increase in government support payments,” CBA head of Australian economics Gareth Aird said.
“The lift … has been enough to see national income spike which means housing savings will continue to balloon.”
The same trend was identified last year in April as a direct result of JobSeeker and JobKeeper payments, although a subsequent surge in spending was initially dampened by general uncertainty.
This time around, wages were trending higher until June on the back of a seriously strong momentum in Australia’s recovery. This was kneecapped as lockdowns and support packages were introduced in eastern states creating a national divergence.
In New South Wales, CBA says wages have fallen 8% as a direct result, while Victorian pay has suffered a 5% fall. Aird expects it will catch up to its northern neighbour in the coming weeks “until reopening”.
Yet “incredible” government support has more than offset the dip.
“For context, in NSW government payments were worth up to 50% of wages and salaries paid over August whereas in May, before the lockdown, they were worth up to 25%,” Aird noted.
As a result, CBA expects Australians to have accumulated $230 billion in savings, or an average of $11,200 “per person over the age of 16”.
The “almighty war chest of savings” is forecast to provide some serious spending firepower as Australians look to blow money they were essentially forced to save.
Mortgage stress rising sharply
Yet the analysis is but one piece of a far more complicated economic picture.
Separate data provided to Business Insider Australia shows that as many as 1.5 million Australians are under mortgage stress, defining borrowers spending 30% or more of their income on repayments.
Unsurprisingly, those feeling the most heat are residents of Australia’s hotspot suburbs, according to analysis by mortgage platform True Savings.
Sydney’s south west, which has faced the toughest lockdown restrictions in the state, is under the most pressure, with two postcodes ranking as the most stressed in the country.
More than three in four borrowers in Liverpool, or 11,336 home owners are currently spending more than 30 cents of every dollar to keep a roof over their heads. In neighbouring Campbelltown, that percentage blows out to almost 90%, or 10,692 homeowners.
The two are joined by nearby Mount Annan, which is ranked as the ninth most under pressure postcode with almost 80% of homeowners classed as ‘mortgage stressed’.
Notably, the majority of the remaining seven suburbs in the top 10 were Victorian, having spent more time in lockdown than any other state.
The LGAs of Casey and Cardinia in Melbourne’s south east, along with nearby Frankston and regional Ballarat were all included.
Between them, those named have around twice the proportion of residents experiencing mortgage stress than the national average.
Yet they’re not alone. The number of borrowers in hardship tripled in August, while one in seven home owners nationally say they’re unsure how they would be able to make their repayments when interest rates rise.