Recent study by St. George Bank found that 45.3 percent of Australians are managing to save money, with 12.4 percent saving a considerable amount.
A positive start to the year, the St.George – Melbourne Institute Household Financial Conditions Index has risen to 12.4 percent, 2.5 percentage points higher from the previous quarter.
Hans Kunnen, Chief Economist of St. George Bank, explained that threats to job security during the Global Financial Crisis (GFC) is one of the key motivators for Australians to save money.
“The GFC scared many people. They saw the dangers of excessive debt and were worried about losing their jobs. They were highly motivated to save. We call that precautionary savings,” he said.
“More recently, we have found that most people have kept their jobs, some young people found employment, many people received small pay rises and their mortgage rates were falling. As this unfolded, they have actually found they could save more.”
The group which saw the greatest improvement in conditions was 18-24 year olds with a 36.1 percent improvement since December 2012. Kunnen explained this is likely due to young people picking up work for the Summer break.
On the housing front, the level of outright home ownership rose considerably across all states, with 45.6 percent of respondents claiming to own their homes outright, an increase from 40.2 percent recorded in December.
Commenting on the implications of the study, Kunnen said that saving now will lead to better peace of mind in the future, where Australians will have the opportunity to move onto business ventures.
“Stronger savings now can lead to more spending in the future. Some people have paid off their home loans and may now be ready to move onto other ventures such as taking out a loan to buy shares or purchase an investment property,” he said.
“The feeling of ‘security’ that often comes with saving, may lead to some loosening of the purse strings later in the year. Many people are saving for holidays.”
Other key findings outlined in the report:
- By state, New South Wales has experienced the greatest improvement in household financial conditions with a 3.8 percent increase, followed by South Australia (2.9 percent), Queensland (2.8 percent), Victoria (2.7 percent) and Western Australia (1.2 percent)
- South Australia experienced the greatest positive shift from 39.8 percent to 49.9 percent for the quarter
- As a preferred savings vehicle, deposits with banks have risen from 83.6 percent to 87.4 percent
- Those holding shares grew from 33.4 percent to 37.3 percent
- 40.0 percent of households indicated they were debt free, down from 42.7 percent
- The number of respondents using credit cards rose to 37.4 percent compared to 31.3 percent in December 2012
- The percentage of respondents with mortgage debt has decreased from 42.4 percent to 38.8 percent
- 60.0 percent of Australians are paying up to 10 percent of their after tax income on servicing debt
- Saving for holidays or travel remain the most popular motivation for saving at 59.5 percent
