COVID-19 Economic Response
Under 25s Case Study
By Rory Gillen – Graduate Accountant at Utopia Financial Partners, Subiaco.
Background Information
- Jeremy – 20 years old
- Studying Accounting while working at a local coffee shop – Lost his job due to impact of COVID-19, which has forced his employer to close the shops and retrench workers.
- Renting in Vic Park – $250 per week – Now unable to afford rent as he’s being unemployed
- Credit Card debt: $1,500
- Super Fund Balance: $2,000
- Car loan repayment: $400 per month
- Approx. expenses per week: $450 (Rent/Food/On-road expenses and Car Loan Payments)
Analysis of Case
The Coronavirus (COVID-19) pandemic is having a significant effect on the under 25 population, not only because they are included in the 20-29 year old demographic currently which has the most confirmed COVID-19 cases of any age group, but also due to a significant number of people in this age group working either casually, part-time or full-time in hospitality and retail industries; those hit hardest by the virus.
Jeremy is a typical 20-year-old student who is currently studying at university and working part-time at a local coffee shop, living pay cheque to pay cheque in order to keep up with his living expenses and car loan, but has recently lost his job due to the impact of the virus. Now, with no income, how is Jeremy going to meet his costs?
The first thing to mention is that the Western Australian Government, as part of the Economic Response to the Coronavirus, has frozen household fees and charges until at least July 1, 2021, meaning Jeremy’s won’t have to worry about increasing utility fees on his rental.
Now, Jeremy can apply for the new Jobseeker Allowance through Centrelink, for which he is now eligible, due to his recent unemployment. This will provide him with $550 per fortnight up until 27th April 2020, which will then double to $1,100 per fortnight under the new Coronavirus Supplement. This now means that up until 27th April 2020, his weekly expenses will be mostly covered by the Allowance, and beyond that date, his expenses will be fully covered with approximately $100 to spare every week.
Jeremy is also eligible apply for the one-time Household Support Payment of $750, which can make up the $175 difference of his weekly expenses up until 27th April 2020 when the Jobseeker allowance increases. However, he is not eligible for the second payment of $750 as he will be already receiving the $1,100 Jobseeker Allowance fortnightly.
It is important to note that there has recently been talk of a living assistance package for those struggling to make rent due to recent unemployment. The assistance amount has not yet been announced, but if the package is released and Jeremy is eligible for the allowance, Jeremy financial situation would improve to the extent that he will be able to set aside money each week into a savings account, should the economy worsen or so that he can pay off some of his outstanding debts.
Now that Jeremy has financially stability for the foreseeable future, he can take advantage of other aspects of the Economic Response to the Coronavirus package. Jeremy currently has $2,000 accumulated in his superannuation, which he is now eligible to access in full (Up to $10,000 for those eligible). Should he decide to withdraw any or all the balance, it could be used to pay off some of his most pressing debts, the most urgent of which due to the high interest rate is the credit card debt. The available balance of his superannuation account would pay off the full amount owing, freeing Jeremy of a significant debt. He could also look at using the amount to pay down the total of his car loan in combination with the additional income being received from the Jobseekers Allowance.