Australians reckon they’ll be fine, the economy not so much
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Australians are super optimistic about how they’ll fare this year but not terribly positive about the world around them.
The Melbourne Institute’s ‘Taking the Pulse of the Nation’ survey found almost 80 per cent of respondents to its query think COVID-19 will economically affect them for up to 12 months.
However, almost 50 per cent of the same group think it’ll affect the economy for 12 months or more.
Study author Professor John P. de New put it down to optimism bias, a tendency to overestimate one’s chances of good fortune and to underestimate one’s risk for misfortune.
He found women and people with jobs were more optimistic about their own prospects.
“In general, this is ‘good news’ for the economy, in that 66 per cent of the respondents are employed,” de New wrote.
“If employed people have a higher likelihood of believing that the economy in general will be affected by the economic fallout of COVID-19 much longer than it will affect themselves, then they are likely to continue purchasing and consuming goods and services, purchasing durable goods, making investments and consume in a manner similar to their previous patterns (pre-COVID-19).
“This may help restart domestic demand and the economy. Conversely, the unemployed – despite receiving the JobSeeker payment – will likely follow a more precautionary savings strategy by prudently restricting expenditures.”
Australian Bureau of Statistics (ABS) data last week showed the unemployment rate in May was 7.1 per cent, up from 6.4 per cent in April. Underemployment however dipped to 13.1 per cent.
The government and central bank are desperate for Australians to keep spending and for money to continue to flow through the economy.
Restarting demand is key to getting the economy back on its feet — the risk is that savings habits formed in the months under lockdown will continue, and Australians won’t return to their pre-COVID-19 free-spending ways.
However, “if employed people disproportionately believe that they themselves will not be affected for as long a time as the general economy, then they are likely to resume spending and consume goods and services”, de New said.
“Those with the economic power to consume, are potentially most likely to do so.”
The survey coincides with ABS data showing a record drop in jobs available.
The number of job vacancies in Australia dropped by 43 per cent over the May 2020 quarter, the largest fall on record and above that seen during the worst of the 1990s recession in November that year.
The private sector has withdrawn the most jobs, with vacancies falling 45 per cent. The public sector has cut its vacancies by 29 per cent. The worst figures were seen in Victoria.
A vacant job is sometimes described as an ’empty seat’, where an employer is actively looking for someone to perform specific tasks. As such, job vacancies are a key indicator of unmet labour demand and a leading indicator of employment.