As the JobKeeper payment wraps up, the Flight Centre Travel Group Ltd (ASX: FLT), Webjet Limited (ASX: WEB) and Qantas Airways Limited (ASX: QAN) share price are all having a party this afternoon. Especially the Flight Centre share price, which is presently up 10%.
The JobKeeper payment is coming to a close and the new package to replace it is a hot topic today. Particularly because it includes 800,000 half-priced airfares within the $1.2 billion stimulus package.
So why exactly are travel and tourism stocks rallying while the government prepares to reel in the JobKeeper payment? And what does the package look like next to US President Joe Biden’s latest stimulus?
How will half-price airfares help the economy?
Commenting on the subsidised ticket scheme, Prime Minister Scott Morrison said that the new program “…means more jobs and investment for the tourism and aviation sectors as Australia heads towards winning our fight against Covid-19 and the restrictions that have hurt so many businesses.”
Investors were happy to hear about the upcoming cash injection to the tourism industry. The Qantas share price is up 2.13% to hit $5.28 a share and the Webjet share price has flown by 4.44% to touch $6.12 at the time of writing.
In addition to the market support we’re seeing, the government is betting that the discounted ride will also get consumers out to spend money.
Prime Minister Morrison concluded: “Our tourism businesses don’t want to rely on government support forever… they want their tourists back.”
Do airline tickets or cash lead to quicker spending?
Meanwhile, the US is rolling out a $1.9 trillion relief bill, which essentially puts US$1,400 in the pocket of many Americans.
A lesson already learned in Australia is that COVID-19 stimulus checks led to a gambling surge, a similar pattern we witnessed during the 2009 stimulus package.
The National Library of Medicine performed research around that stimulus and revealed that the issued cash allowances resulted in a 26% increase in electronic gaming machine (EGM) revenues. Over $60 million in additional tax revenue for state governments was also accrued.
It seems likely that the federal government kept this in mind when considering how to package up this round of benefits. The question is, will people take advantage of the offering? Or is it just business that is catching a break?
While some investors are likely enjoying the rally we’re seeing with tourism stocks today, such as the Flight Centre share price gaining more than $1 a share, we’re looking at a much bigger picture.
The JobKeeper payment was an economic staple for a decent amount of time and the new stimulus package has big shoes to fill. We’ll have to wait and see if half-price airfares will be up for the challenge.