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Consumer savings reach historic highs
Australia’s savings rate has surged in 2020, with a collapse in consumer confidence leading households to pocket money at a time when the economy needs them to spend, new research has shown.
Consumer savings reach historic highs
Australia’s savings rate has surged in 2020, with a collapse in consumer confidence leading households to pocket money at a time when the economy needs them to spend, new research has shown.
According to IBIS World’s senior analyst, Matthew Reeves, household saving rates as a share of gross disposable income jumped from 2.7 per cent in 2019-20 to 7.9 per cent, with mortgage deferrals and rent relief providing a tailwind for savers.
Similarly, the $50 billion to date from the Morrison government’s JobKeeper and JobSeeker payments, which have seen real household disposable income rise by 3.4 per cent, has not led to a jump in spending.
However, despite government benefits, consumers continue to save as they worry about the larger economy.
“The COVID-19 pandemic may also have resulted in a higher household savings rate because of the steep decline in the sharemarket and other assets such as housing,” Mr Reeves said.
“Households rely on their savings to fund consumption post-retirement, particularly since the advent of widespread superannuation, they may be saving more to restore their wealth.”
Despite a gradual recovery, the senior analyst is expecting Australians to continue to save money.
“Household spending is expected to recover, provided that no significant new waves of infections are reported across the country. As the local economy continues to open up, especially in Victoria, the savings rate is likely to drop from the highs seen in the June quarter,” Mr Reeves explained.
“However, as with the post-GFC recovery, savings are likely to remain at elevated levels for at least the next three years. Consumers are likely to spend cautiously as they did after the GFC.
“Consumer spending patterns will be driven by the lasting effects of the virus which are expected to remain until a successful vaccine is produced.”
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