Early super release scheme was ‘ineffective’, says e61 Institute
The ‘Early Release of Super’ scheme was not as effective as it was intended to be in stimulating spending, reducing financial stress, and improving wellbeing during COVID-19, research by e61 Institute revealed.
New research from the e61 Institute found boosting income had significantly beneficial impacts on spending, financial stress, and wellbeing; however, the early release of super did not.
Between April 2020 and December 2020, the Australian government introduced the Early Release of Super Scheme (ERS) that allowed individuals experiencing financial hardship during the pandemic to access up to $10,000 of their super.
Based on the analysis of bank transaction data, people who participated in the ERS scheme spent 31 per cent of the money they withdrew in the first two weeks according to the e61 Institute.
From the bank data, it was also found people who received the one-off $750 Economic Support Payment (ESP) spent it on withdrawing cash and essentials such as groceries.
The $550 per fortnight JobSeeker Payment Coronavirus Supplement (JSP) was also spent quickly on essentials and the withdrawal of cash.
E61 Institute said ESP recipients spent 70 per cent of the payment and JSP recipients spent 58 per cent of the extra support over their first fortnight.
People who participated in the ERS scheme spent 31 per cent of the extra support over their first fortnight.
E61 Institute said to assess the wellbeing impact of the financial support measures, the Household Income and Labour Dynamics in Australia was also analysed as part of a submission to government.
“Wellbeing temporarily improved for JSP recipients while the supplement was in place but the ERS scheme – despite being intended to target those in “financial stress” – did not lead to improvements in financial resilience or wellbeing, and nor did the ESP,” e61 Institute said.
E61 Institute research director Dr Gianni La Cava said the JobSeeker supplement was the only beneficial incentive.
“Our research suggests that in terms of stimulating spending and improving wellbeing, the JobSeeker supplement was the most effective economic support payment deployed during the COVID-19 pandemic,” he said.
“Recipients spent the JSP supplement and ESP quickly with 20–25 per cent of each payment spent on the day it was received, while the ERS was spent more gradually over the first fortnight.
“Notably, ERS had the biggest impact on aggregate spending because it was of larger value, on average.”
Between April and June 2020, e61 Institute said around 4.9 million people received the ESP, while 2.5 million received the JSP and 2.4 million applied for ERS with an average of $8,223 withdrawn.
According to e61 Institute, the ERS scheme created an estimated $6.3 billion of extra spending between April and June 2020 compared to $2.7 billion for the ESP and $4.2 billion for the JSP.
Dr La Cava said the limited impact of the ERS scheme on financial resilience or wellbeing suggests it was too broad.
“The fact the JSP was the only payment to significantly improve recipients’ wellbeing may be because it made up 25 per cent income for its recipients, compared with 19 per cent for the ERS – suggesting it was better targeted at people on lower incomes,” he said.
“If policymakers want to stimulate spending, reduce financial stress and improve wellbeing during future economic breakdowns, targeted boosts to income support programs should be part of their toolkit.”
