• The overwhelming majority of tax return dollars are unlikely to make it into the real economy, according to the latest survey by Finder.
• Responses indicates that just 7% of Australians actually intend to spend their return this year, with half of all recipients already planning to save it.
• Australia’s economic recovery is partly reliant on a prolonged spending spree but the data indicates this might be muted due to concerns over household debt.
• Visit Business Insider Australia’s homepage for more stories.

The end of financial year (EOFY) is almost here, and with it a $17.6 billion cash injection in the form of Australian tax returns.

As taxpayers get ready to receive it though, there’s plenty of reason to think half that money won’t be making it into the real economy.

Some 30% of Australians don’t even expect to receive one. Another 35%, or half of those that do, intend to save it, according to a new Finder survey.

It would suggest that $8.8 billion will simply top up savings accounts, rather than make its way through cash registers, defying the hopes of Treasury.

Since last year, the Morrison government has built their forecasts on the premise that some $200 billion of additional savings accumulated during the pandemic would be spent, fuelling an economic recovery.

Early spending data supports the theory, with the Reserve Bank pinning its forecasts to the assumption.

But the expectations surrounding the coming tax return partly undermines such a hope, at a time that consumer confidence and business confidence is riding high.

The results indicate that of the remaining $8.8 billion, roughly $3 billion will be used simply to pay household bills. A further $1.7 billion will service burgeoning mortgages, while another $2 billion will pay down other debts, including credit card balances and personal loans.

The suggestion of rising interest rates will heap more pressure on households to pay down their debts while repayments remain lower, while further virus outbreaks could hamper confidence further.

It leaves just $2 billion to be spent in the real economy, with about half of that to go towards a holiday, aiding Australia’s ailing tourism industry. The remaining $1 billion will be spent on retail therapy.

The $2 billion spend is unlikely to really be noticed by Australian businesses, especially spread out over a period of months.

“In previous years, we would have anticipated higher rates of spending on things like retail therapy and travel,” personal finance commentator Kate Browne said.

“Australians are understandably wanting to save whatever cash they can, given the uncertain events of the past 12 months.”

There is however reason to suspect that Australians may not be the best judge of how they will spend the money. For one, most taxpayers will receive up to $1,080 extra in the form of the low and middle income offset that was extended as part of the May Federal Budget.

The reprieve could see both more taxpayers receive an unexpected windfall as long as they lodge a return, increasing the chances of it being spent altogether.

Canberra will certainly be hoping so.

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