Insights into financial wellbeing in Australia - Q&A

Is not the drop in expenditure under COVID-19 partly an increase in precautionary saving and partly regulations restricting consumption choices? Challenge is the mix of effects.
Yes, there is a combination of voluntary precautionary savings and involuntary/forced savings. I cannot go to certain businesses that were deemed not “essential”. However many stores still offered an internet sales portal with product delivery and restaurants with food delivery etc. One might think that spending might be switched entirely to other goods/services that could be bought, but this is not the case. Spending is down across the board. I hypothesise that the larger portion of that savings is “precautionary” for these reasons.

If people have massively increased precautionary savings due to COVID-19, does that mean that the recent government tax cuts will be less effective in increasing spending and jumpstarting the economy?
Yes, some of the tax cuts will simply be saved, and added to the precautionary savings. This means that the intended stimulus effect will be higher than what is actually achieved. The CBA data will allow us to check this. This will be even more so for tax cuts for people with larger incomes, who are less likely to consume anyway.

I might have missed it but was FWB measured at the household level or individual level? If the former, how did multiple earning adults and numbers of dependent children mediate the affects you have shown here today? I suppose this is the data for individual respondents? Do you have data on whether these people are singles or head of a family of 2/3/4/5 etc?
We have measured FWB at the individual level. Both data sets. The Observed FWB analysis is at the economy-wide macro level anyway. The Reported FWB which relies on survey responses is done at the person level, yet I capture the household size and use it as a control variable in the analysis. So the Reported FWB results are -net- of household size.

A very basic question: in the first graph that was shown, FWB had a min of about 45 and a max of about 47 (I might be mistaken). Is that an economically significant variation?
Yes, the variation at the end (since Feb 2020) is significantly different. I have a time-series of the overall indicator and the 5 component parts for 24 months. The indicators are based off more than 5million persons/CBA clients monthly. They are precisely estimated.

Do not these findings suggest the government should do more in terms of direct spending on needed human services such as dental, mental health, housing etc?
That could be. If Australians are deep into precautionary savings mode, then they may be willing to forgo dental checkups, trips to psychologists, etc. That may have longer term consequences of larger expenditures. So if the commonwealth/state governments can help to make sure that preventative expenditures are still made, then this will save public expenditure in the long run.