Wed, 26 May|
Seminar: Early Pension Withdrawals as Stimulus
Understanding the impact of early pension withdrawal as stimulus on marginal propensity to consume (MPC) through the analysis of detailed bank account transaction data.
Time & Location
26 May 2021, 3:00 pm – 4:30 pm AEST
About the event
Pensions represent an alternative funding source for cash stimulus during recessions, enabling governments to overcome constraints on public debt.
During the COVID- 19 crisis, the Australian Government provided cash stimulus of up to AUD$20,000 (US$15,000) per person via early pension withdrawals, with a quarter of the working-age population withdrawing 3% of GDP.
Using detailed bank account transaction data, we find a marginal propensity to consume (MPC) out of these withdrawals of 0.6, with the effect gradually falling over a 6-week period. This suggests an immediate GDP impact of just under 2%.
Among those who took up the policy, treatment effects increased substantially with low liquidity, income loss and welfare recipient status, suggesting even tighter targeting would have raised the MPC.