Households are reducing debt and boosting the piggy bank, writes Head of St George Business Banking QLD, Peter Bell.
Four out of every ten Australian households have no debt and more than half are using 10 per cent or less of their income for repayments, according to the St George-Melbourne Institute Household Financial Conditions Report.
The report shows that in the face of low interest rates, Aussies are improving their financial position by directing their savings towards property which was the only area of savings that saw an increase this quarter, lifting by 1.6 percentage points.
The report also reveals that credit card debt has fallen below 30 per cent for the third consecutive quarter, with 29.6 per cent of households saying they hold credit card debt for the June quarter. Prior to December last year, credit card debt had not fallen below 30 per cent of households since September 2008.
The proportion of Australian households continuing to boost the piggy-bank and ‘save a lot’ rose a solid 1.9 percentage points to 8.2 per cent over the quarter – the highest level since December 2013. Conversely, four in every ten (39 per cent) households said they were able to maintain some form of saving.
Overall we’re seeing Australian household conditions rising a strong 2.4 per cent in the June quarter, up 7.3 per cent on a year earlier.
This is great news for households and shows the effect of mortgage rates declining in the first half of 2015. We’re seeing households not only reduce their credit card debt but mortgage debt has fallen by 3.3 percentage points over the same period.
In previous quarters we’ve seen more Australians draw down on their savings, representing an increased willingness to spend. However, we’re now seeing households revert back to a cautious approach, with less people drawing on their savings and more people using the low interest rates to pay off their debt quickly.
So what are Australians currently saving for?
The June quarter saw a 2 percentage points rise in those whose motivation for saving was to put a deposit on a house.
While there’s been a rise in the desire to save for a deposit this quarter, this factor as a motivation to save has declined over the past twelve months, indicating potential purchasers may have become discouraged in some markets.
The report also shows over the year to June ‘precaution’ as a motivator lifted 6.6 percentage points to 57.4 per cent. Forecasts of a rising unemployment rate may sit behind this increase.
Saving for holidays still remains the number one motivation for 59 per cent of respondents, followed by saving for a rainy day (57.4 per cent), saving for retirement (46.8 per cent), saving to pay debt (43.6 per cent) and saving to renovate (37.1 per cent).
About the St George-Melbourne Institute Household Financial Conditions Report
The St George-Melbourne Institute Household Financial Conditions Report is a national survey of 1200 respondents to arrive at a summary of key savings behaviours of households each quarter.
The above information was gathered in June 2015, further quarterly results will be released in October 2015.
For more information on how St George can help you save, call 133 800