When you look at how Aussie households are actually doing, you get a very surprising story…
Are Australian households actually building up a massive war-chest?
Are they about to unleash a surge of cash onto the asset markets?
Maybe.
WE’re getting pretty used to all the bad numbers. The scary numbers. The Australian Bureau of Statistics has numbers. Lots of numbers. Most of those numbers are scary.
Sad.
So sure, we’re hearing a lot about how stuffed the economy is.
But on the other side of that ledger sits the government.
And while Covid has torn a path of carnage through the economy, the government has also rushed in to try and patch that up with cash. Mountains and mountains of cash.
Happy.
And how is it all balancing out?
Pretty well actually. Australian households are actually in a better financial position than they were at the start of the crisis.
Wait, say what?
No seriously, that’s what the data says.
And look yes, some individual households are doing it tough. They’ve lost jobs or lost businesses, and they’re hurting. Absolutely no denying it.
But for every household that’s gone backwards, another has gone forward, and averaging it out over the entire population, you’ve got a net positive.
We’ve got a few data sources telling us this now.
First there’s analytics firm AlphaBeta:
Analysis of household cashflow by analytics firm AlphaBeta, a part of Accenture, shows the slump in wages suffered by households due to the pandemic (plus and the fall in unincorporated business income flowing to households) was more than offset by government payments, superannuation withdrawals and private sector hardship support between April and June.

It reveals a net increase in household cashflow of nearly $24 billion over that period.
Yep. You read that right. Aussie households have picked up a windfall $24 billion!
$24 billion! That’s not nothing. That’s a long way from nothing.
Happy.
The CBA are telling a similar story, based on the flows they’re monitoring into customer accounts. They reckon that on the back of government support programs and the early access to super, households are in a stronger financial position.
The income of the average household rose by 4.2% over the year to Q2 20, up from 2.4% over the previous year. Salaries have fallen due to coronavirus job losses. But investment income and government benefits have increased sharply. Investment income is capturing the early withdrawal of super which is part of the COVID-19 response

That investment income is a doozy, but remember it’s all about the super withdrawal.
Still, in aggregate and on average, households are substantially better off.
And at the same time, they’re spending less. Spending has fallen by around 9% over the year to Q2 2020.

So if they’re earning more and spending less, that must mean that households are saving more. That’s a good thing. That’s shoring up their long-term financial position.
So this is a story about households having more money.
It’s also a story about households putting that money aside for a rainy day.
But what if the rain never comes?
What if things get back to normal pretty quickly, and Aussie households just find themselves $24 billion better off?
Where does that money go then?
It goes into Jet skis obviously, and then into asset markets after that.
Boom.
JG