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How young Australians are cutting spending and prices falling during the worst crisis in 90 years

What Australia’s worst economic crisis in a century means to you: from cutting personal spending to predicted record price falls

  • The Canstar survey found that a third or 6.5 million Australians had cut spending
  • Westpac bank predicts Australian deflation for the first time in 60 years
  • Treasury has revealed that Australia has a budget deficit of $ 184.5 billion
  • This will make up most of the economy since World War II

Australia’s worst economic crisis in 90 years terrifies consumers to cut their spending drastically – causing prices to drop.

Treasury expects gross domestic product to fall by a record seven percent in the June quarter alone, wiping out more than three years of capital gains.

At Christmas, the department in charge of budgeting expects the unemployment rate to reach 9.25 percent, a level unseen since 1994, with a record one million Australians already officially out of work.

Westpac also predicts a price drop, also known as deflation, for the first time in 60 years, as landlords cut rents and transport costs drop if Australians stay home.

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Australia's worst economic crisis in 90 years terrifies consumers to cut their spending drastically - causing prices to drop. Financial comparison group Canstar estimated that 6.5 million Australians had already cut their spending on vacation repayments in September, just as JobKeeper's salary subsidies are paid back. Depicted is a barista in inland Prahan in Melbourne on July 22, 2020

Australia’s worst economic crisis in 90 years terrifies consumers to cut their spending drastically – causing prices to drop. Financial comparison group Canstar estimated that 6.5 million Australians had already cut their spending on vacation repayments in September, just as JobKeeper’s salary subsidies are paid back. Depicted is a barista in Prahan in the interior of Melbourne on July 22, 2020

Financial comparison group Canstar estimated that 6.5 million Australians had already cut their spending on vacation repayments in September, just as JobKeeper’s salary subsidies are paid back.

Steve Mickenbecker, group director of the Canstar group, said younger adults would be even more likely to cut their spending, and more of them would lose their jobs because of the COVID-19 shutdowns.

“Young people working in the hospitality and tourism industries are some of the hardest hit during the coronavirus pandemic, with no choice but to cut their spending,” he said.

Regardless of your age or profession, the same rules apply to everyone; if you’ve had a financial blow in the past few months, now is the time to take action and use your money sparingly. ‘

The Canstar survey of 1,024 people this month found that 33 percent of respondents generally cut their spending, but this rose to 45 percent for millennials.

A cut in personal spending is also likely to lead to deflation for the first time since the early 1960s, as Westpac predicts a 2.4 percent drop in consumer prices in June. Cheaper rent (house in Melbourne, photo) is an important factor in this

A cut in personal spending is also likely to lead to deflation for the first time since the early 1960s, as Westpac predicts a 2.4 percent drop in consumer prices in June. Cheaper rent (house in Melbourne, photo) is an important factor in this

A cut in personal spending is also likely to lead to deflation for the first time since the early 1960s, as Westpac predicts a 2.4 percent drop in consumer prices in June. Cheaper rent (house in Melbourne, photo) is an important factor in this

A cut in personal spending is also likely to lead to deflation for the first time since the early 1960s, as Westpac predicts a 2.4 percent drop in consumer prices in June.

Economic downfall at a glance

Treasury predicts a budget deficit of $ 184.5 billion for 2020-21, compared to a deficit of $ 85.8 billion in 2019-20

This will account for 9.7 percent of gross domestic product – the highest part of the economy since 1945 at the end of World War II

Unemployment is expected to be 9.25% in December, a level not seen since September 1994

In the June quarter alone, GDP is said to have fallen by seven percent, equivalent to three years of growth

Source: Treasury Economic and Fiscal Update, July 23, 2020

In other words, price drops in three months will be greater than price increases throughout the year until the end of March.

On an annual basis, Westpac predicts that prices would have fallen by 0.9 percent in the past fiscal year.

Westpac senior economist Justin Smirk said cheaper rent was a major source of this deflation.

Rising vacancy rates, deferred payments, rental holidays and even rent reductions have been widely reported, he said.

A drop in gasoline prices, to levels below $ 1 per liter in April, and a wave of home-working professionals have both cut transportation costs.

Treasurer Josh Frydenberg revealed on Thursday that Australia would have a budget deficit of $ 184.5 billion for this fiscal year.

This would account for 9.7 percent of gross domestic product – the highest part of the economy since World War II.

Government gross debt is expected to reach $ 852 billion by the end of 2020-21, as taxpayers funded JobKeeper’s wage subsidies and premiums, known as JobSeeker.

Economists fear it will take three decades to pay off and return to a budget surplus for the first time since 2007, despite Australia’s lower government debt compared to other wealthy countries.

Mr. Frydenberg described it as the worst crisis in almost 90 years.

“Australia and the world are now experiencing the worst economic crisis since the Great Depression,” he said.

Despite the bad news, JobKeeper’s wage subsidies will drop to $ 1,200 for a fortnight at the end of September, and to $ 1,000 next year, as part of a two-tier system based on hours worked.

Treasurer Josh Frydenberg revealed on Thursday that Australia would have a budget deficit of $ 184.5 billion for this fiscal year

Treasurer Josh Frydenberg revealed on Thursday that Australia would have a budget deficit of $ 184.5 billion for this fiscal year

Treasurer Josh Frydenberg revealed on Thursday that Australia would have a budget deficit of $ 184.5 billion for this fiscal year

How will support payments change from September?

JOBKEEPER

* The biweekly wage subsidy of $ 1,500 continues through September 27

* From late September to January, JobKeeper is reduced to $ 1,200 for full-time employees and $ 750 for people working 20 hours or less

* From January to March, the full-time rate is $ 1000 and the part-time rate is reduced to $ 650

* Companies that turn less than $ 1 billion must qualify for the program again in both phases by showing a 30 percent drop in sales.

* Businesses with revenues in excess of $ 1 billion must demonstrate a 50 percent decline

JOBSEEKING

* The increased unemployment benefit will remain at $ 1100 for two weeks until September 27

* From that date to the end of the year, the $ 550 coronavirus supplement will be reduced by $ 300 to pay the total fortnightly payment of $ 800

* People can earn up to $ 300 without having their payment reduced

* The rules for mutual obligations requiring people to look for four jobs per month will be restarted on August 4

* Penalties for people who refuse a job offer will be reintroduced

* Job search requirements will increase in September, when the asset test returns

* The fixed JobSeeker rate that will take effect from January next year will be announced in the October 6 budget.

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