Author Topic: Consumers aren't spending their tax rebates  (Read 5145 times)

Fresh Bread

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Consumers aren't spending their tax rebates
« on: September 03, 2019, 02:31:23 PM »
We haven't been spending our tax rebates like good little consumers.

https://www.smh.com.au/politics/federal/government-braces-for-poor-gdp-result-as-shoppers-keep-wallets-shut-20190903-p52nj2.html

It's probably due to fear of recession but I feel pleased that people seem to have been sensible, even mustachian? It's also possible that sustainable/ environmental movements are gaining traction, but maybe I'm being optimistic there.

marty998

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Re: Consumers aren't spending their tax rebates
« Reply #1 on: September 03, 2019, 03:19:16 PM »
Seems like people are doing something sensible with it like paying down debt.
https://www.ratecity.com.au/credit-cards/news/australians-starting-kick-credit-card-debt-addiction

This is article is a few months old but shows the general trend for credit card debt is going down.

Bad news for the big banks because credit cards are by far the most profitable product for them.

Gremlin

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Re: Consumers aren't spending their tax rebates
« Reply #2 on: September 03, 2019, 07:52:00 PM »
Seems like people are doing something sensible with it like paying down debt.
https://www.ratecity.com.au/credit-cards/news/australians-starting-kick-credit-card-debt-addiction

This is article is a few months old but shows the general trend for credit card debt is going down.

Bad news for the big banks because credit cards are by far the most profitable product for them.
Not sure this is truly a reduction in "short-term" debt or whether it reflects a movement away from credit cards to Afterpay/Zip etc as a means of funding immediate wants.  Would love to understand how much the growth in these services offset the fall in credit cards...

Bloop Bloop

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Re: Consumers aren't spending their tax rebates
« Reply #3 on: September 03, 2019, 08:56:04 PM »
When the tax cuts eventually flow through I won't be spending them on consumption. That's very anti-Mustachian :)

My partner got a modest tax rebate and she is putting that towards our next overseas holiday. Even with the weak Aussie dollar, most overseas countries just give you better bang for buck when it comes to, well, just about anything.

The ABS figures out today show a very low savings ratio so it's not the case that people are banking up the tax rebates. So I assume that the tax rebate money is (1) being used to pay down debt; (2) being used to pay for stuff in lieu of the usual 3% annual wage increase, which hasn't been forthcoming the last few years.

middo

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Re: Consumers aren't spending their tax rebates
« Reply #4 on: September 03, 2019, 11:26:58 PM »
From my understanding, the change is where the credit is accrued, rather than just paying down debt.  I recently saw (somewhere) that as credit on cards has dropped a bit, the rise in Afterpay/Zippay etc more than offset the difference.

I'm still waiting for my tax return.  It will go straight onto debt paydown.

Fresh Bread

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Re: Consumers aren't spending their tax rebates
« Reply #5 on: September 04, 2019, 12:29:22 AM »
Well the article says that the retail sector has contracted so even if what has been spent is on Afterpay, it's lower than normal. Or been spent in other sectors? I guess it will become apparent. Maybe everyone got a cleaner and paid cash. Do holidays count as tourism not retail?

marty998

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Re: Consumers aren't spending their tax rebates
« Reply #6 on: September 04, 2019, 03:56:53 AM »
Afterpay and ZipPay don't have nearly the same amount of market share as what the banks are losing in credit extended. Additionally with Afterpay you still have to pay off the balances pretty quickly - credit cards can defer the majority of the payment indefinitely if you're not smart with it.

On the topic of retail, its interesting that Gerry Harvey & Harvey Norman have taken the decision to raise capital now when times are still relatively good. Usually you see corporates only raising funds when times are absolutely desperate, the share price has been decimated and there's no other option (AMP lol). HVN seems to be trying to get ahead of the conditions to shore up its balance sheet now. Quite refreshing to see, good indicator of management that knows what they are doing.

Bloop Bloop

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Re: Consumers aren't spending their tax rebates
« Reply #7 on: September 04, 2019, 09:50:22 PM »
Assuming that we are in a recession, is it really all that bad?

For example, we now have GDP growth of 1.5% yearly, wage growth of 2% and CPI growth of 2%. Unemployment still same as ever, 5%.

In the past we might have had 4% GDP, 5% wage and 3.5% CPI.

As far as I can tell, the only real change for households is that real income growth is 0 (or slightly negative) instead of 1.5% like it was previously. Okay, not great, but on an individual level it means almost nothing.

Plus having less economic activity is better for the planet and might show that we're focussing more on sustainable spending instead of lavish spending on flat screen TVs. Less spending = less demand for retail services = lower prices = better value and less crap.

Plus lower inflation and lower asset price increases are better for those of us investing for yield who don't want asset crashes or bubbles along the way.

Can someone who knows something about economics point out the things I'm missing? Thanks.

marty998

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Re: Consumers aren't spending their tax rebates
« Reply #8 on: September 05, 2019, 07:28:09 AM »
Assuming that we are in a recession, is it really all that bad?

For example, we now have GDP growth of 1.5% yearly, wage growth of 2% and CPI growth of 2%. Unemployment still same as ever, 5%.

In the past we might have had 4% GDP, 5% wage and 3.5% CPI.

As far as I can tell, the only real change for households is that real income growth is 0 (or slightly negative) instead of 1.5% like it was previously. Okay, not great, but on an individual level it means almost nothing.

Plus having less economic activity is better for the planet and might show that we're focussing more on sustainable spending instead of lavish spending on flat screen TVs. Less spending = less demand for retail services = lower prices = better value and less crap.

Plus lower inflation and lower asset price increases are better for those of us investing for yield who don't want asset crashes or bubbles along the way.

Can someone who knows something about economics point out the things I'm missing? Thanks.

Not everyone earns as much as you do Bloop. There are millions of people working in retail and other sectors that do not enjoy the wage growth you have experienced.

Wage growth of 2% is an average. Some will get 6% and some who are forced into changing jobs might be lucky to get -2%.

Unemployment might by 5%ish. Underemployment is much higher.

On the spending side - you don't don't have kids. Your expense profile is much different to the average family, and the composition of the changes in price of your expenditure is going to be different.

I'm in the same boat as you. My expenses are actually going down. But I don't pay childcare, school fees, and birthday presents for every kid in the class.

Life is good for professionals and managers. It's not so great for everyone else, especially the hundreds of thousands in construction and trades who will see work dry up over the coming 12 months.

middo

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Re: Consumers aren't spending their tax rebates
« Reply #9 on: September 24, 2019, 07:55:00 PM »
I guess we will be doing our but for the economy.  Our tax return will go towards restumping our house.  Necessary, and while we have been saving for it, a sudden cash injection makes it easier to justify doing it now rather than some nebulous "later".

Bloop Bloop

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Re: Consumers aren't spending their tax rebates
« Reply #10 on: November 15, 2019, 04:19:17 AM »
Reckon there will be big discounting over Christmas? I've been delaying my retail spending till things worsen a bit...

middo

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Re: Consumers aren't spending their tax rebates
« Reply #11 on: November 15, 2019, 10:27:27 PM »
My son's tax return was sequested by Centrelink before he had been informed by them that they believed he has a $16,000 robo debt.

The "debt" is caused by 7 years of working hard over his summer holidays and earning money (and informing them and not getting payments) while at uni, and then spending weeks trying to get payments restarted in March.

The stupidity of it is that he has to find 7 years of payslips to prove that he earned the money when he did.  That is hurting the economy.

It's also caused fundamentally because centrelink works on weekly income, tax works annually.  Using one to check the other is plain stupid.

marty998

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Re: Consumers aren't spending their tax rebates
« Reply #12 on: November 15, 2019, 10:47:41 PM »
My son's tax return was sequested by Centrelink before he had been informed by them that they believed he has a $16,000 robo debt.

The "debt" is caused by 7 years of working hard over his summer holidays and earning money (and informing them and not getting payments) while at uni, and then spending weeks trying to get payments restarted in March.

The stupidity of it is that he has to find 7 years of payslips to prove that he earned the money when he did.  That is hurting the economy.

It's also caused fundamentally because centrelink works on weekly income, tax works annually.  Using one to check the other is plain stupid.


Oh that's disgraceful. Write to your local MP, might help move things along?

One saving grace for the future is that single touch payroll should eliminate this problem with the ATO receiving salary data every pay period now. Whether that is synced to the Centrelink systems is another matter but you'd hope so.

mjr

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Re: Consumers aren't spending their tax rebates
« Reply #13 on: November 15, 2019, 10:59:07 PM »
That is disgraceful.  Wtf implements systems like this ?

Fingers crossed that Centrelink will never know that I exist

Kyle Schuant

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Re: Consumers aren't spending their tax rebates
« Reply #14 on: November 16, 2019, 12:21:40 AM »
It's also caused fundamentally because centrelink works on weekly income, tax works annually.  Using one to check the other is plain stupid.
And the childcare rebate works off annual income, voluntary reporting and repayment - no robodebt for Chantelle from Toorak, just for Jaxon from Broadmeadows. So the people on low income miss out, and the people on middle incomes get it easy. So nice how the government panders to the middle class and pisses on the working and unemployed classes.

I'm self-employed, so I usually owe tax. When I called up the ATO to say I wanted to set up a payment plan for PAYG to pay in advance they seemed confused, I had to talk to a lot more people than when I've called trying not to pay.

Hitting low-income people and coddling middle and high-income people, and getting in your way when you're trying to give them money, then threatening a whistleblower with six times more prison time than he'd have got from running over the head of the ATO with a bus, the ATO and government are a funny bunch. :)

marty998

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Re: Consumers aren't spending their tax rebates
« Reply #15 on: November 18, 2019, 06:49:51 PM »
Gubbmint is immediately stopping robodebts raised by averaging ATO data.

Might be some good news for you @middo

https://mobile.abc.net.au/news/2019-11-19/robodebt-scheme-human-services-department-halts-existing-debts/11717188?pfmredir=sm

middo

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Re: Consumers aren't spending their tax rebates
« Reply #16 on: November 18, 2019, 11:43:08 PM »
Gubbmint is immediately stopping robodebts raised by averaging ATO data.

Might be some good news for you @middo

https://mobile.abc.net.au/news/2019-11-19/robodebt-scheme-human-services-department-halts-existing-debts/11717188?pfmredir=sm

Cheers for that.  I don't know if it affects my son directly or not, but in principal it does.

middo

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Re: Consumers aren't spending their tax rebates
« Reply #17 on: November 20, 2019, 12:19:10 AM »
Gubbmint is immediately stopping robodebts raised by averaging ATO data.

Might be some good news for you @middo

https://mobile.abc.net.au/news/2019-11-19/robodebt-scheme-human-services-department-halts-existing-debts/11717188?pfmredir=sm

Cheers for that.  I don't know if it affects my son directly or not, but in principal it does.

My son has followed this up.  His "debt" has been put on hold.  No word on whether that means it will be cancelled, and even less word on why he hasn't received his tax return, but at least it is a start.

He felt that this was enough good news to buy new tyres today.  Think about that.