How Much Did the 2009 Fiscal Stimulus Boost Spending? Evidence from a Household Survey

Abstract

Using survey evidence, I estimate the impact of a $12 billion package of household payments delivered in Australia between March and May 2009. Forty percent of households who said that they received the payment reported having spent it. This is approximately twice the spending rate that has been recorded in surveys assessing the 2001 and 2008 tax rebates in the United States. One possible explanation for this is that individuals are more likely to spend “bonuses” (as the Australian payments were described) than “rebates” (as the US payments were described). Using an approach for converting spending rates into an aggregate marginal propensity to consume (MPC), the Australian results are consistent with an aggregate MPC of 0.41−0.42. Since this estimate is based only on first-quarter spending, it may be an underestimate of the longer-run impact of the package on consumer expenditure.

Keywords: fiscal stimulus, marginal propensity to consume, household expenditure

JEL Classification: H24, H31