Most Australians will save cash from the upcoming Stage 3 tax cuts, with a major bank finding 80 per cent of the July boost will go into people’s savings rather than launching a new wave of purchases .
Westpac’s latest consumer confidence index says tax cuts will “repair” finances after two years of continued pressures on the cost of living.
“Of those surveyed who expect to receive a tax cut, 30 per cent plan to save all of it, while another 50 per cent expect to save at least half,” said Westpac chief economist Matthew Hassan.
‘We estimate that households plan to save about 80 percent of the Stage 3 tax cuts.
Westpac’s latest consumer confidence index says tax cuts will “repair” finances after two years of continued pressures on the cost of living.
“The results suggest that consumers will use the tax relief as an opportunity to repair their finances and rebuild their savings reserves rather than spend,” he continues.
‘If they go ahead with this plan, only $4.7 billion of the $23.3 billion in tax relief will be spent, which is an increase in spending of 0.35 points.
“If, instead, they chose to save half, the increase would be closer to 0.9 points.”
Westpac’s data matches a NAB survey conducted in early May, which found a majority would use the tax cut to save money or offset cost of living pressures rather than splurge on one-off items.
The bank estimates that more than a third, or 36 percent, plan to save extra money instead of splurging on non-essentials.
The majority of Gen Z Australians (53 per cent) will save rather than spend.
49 percent of those earning between $100,000 and $150,000 are likely to prefer frugality over extravagance, NAB data shows.
Some 29 percent plan to tackle rising living costs with increased cash, while 22 percent will use it to pay down debt.
Most Gen Z Australians will save rather than spend on non-essential items
From July 1, Australians will pocket between $350 and $4,500 in extra cash each year, depending on their income level, as part of the tax cut package.
Westpac’s index shows Australian consumers remain “deeply pessimistic” as fears about inflation and rising rates rise.
The index fell 0.3 percent in May from 82.4 in April.
“Although expectations improved slightly in May, this was overshadowed by a further deterioration in current conditions and fears that persistently high inflation may require further interest rate increases,” Mr Hassan said.
“The level of sentiment and the mix and responses to additional questions about the July tax cuts point to continued restraint in consumer spending heading into the second half of the year.”
