Recommend Print

Cash flow

Household Finances Hit 10-Year Low: Melbourne Institute

Household finances hit ‘10-year low’

By Michelle Hammond
Wednesday, 22 June 2011

Household finances have hit their lowest level in a decade as consumers increase their precautionary savings, according to a new report by the Melbourne Institute.

 

The Melbourne Institute Household Financial Conditions Index fell 24.3% in June to 25.2 points - the lowest level since the survey began in 2001.

 

The index shows the proportion of households which are saving, relative to the proportion of households which are running into debt or drawing on their savings.

 

Edda Claus, a research fellow at the Melbourne Institute, says she’s surprised by the result.

 

“This record low comes as a surprise as house price rises have been moderating and the unemployment rate is below 5%,” Dr Claus says.

 

But according to the survey, the high Australian dollar, coupled with economic uncertainty, has promoted consumers to increase their precautionary spending.

 

The research reveals the most popular reason to save is for a holiday, with 58.7% specifying it as their key reason.

 

The result is in line with latest research from Bankwest, which reveals most Australians plan to spend their tax return on holidays in a bid to take advantage of the high dollar.

 

According to the Melbourne Institute, the second most popular reason for saving is “for a rainy day or a precaution”, rising to 55.4%. It is the highest result since respondents started nominating their motivation for savings in May 2005. Repaying debt and paying bills was the third most popular reason for saving.

 

The findings back up a recent report by CommSec chief economist Craig James, which highlights a major shift in recent consumer trends.

 

“Today’s consumer is more likely to spend cautiously, put purchases on EFTPOS rather than the credit card [and] more inclined to put money in the bank,” James told StartupSmart.

 

“The bottom line is that retailers and other consumer-focused businesses can’t take Aussie consumers for granted.”

 

Bankwest senior analyst Tim Crawford says for those businesses looking to lure new customers, it’s all about value.

 

“People spending are looking for value, so businesses…need to convince consumers they’re getting a good deal,” he says.

Comments (0)

Subscribe to this comment's feed

Write comment

You must be logged in to post a comment. Please register if you do not have an account yet.

busy
Invalid Input
 

Follow us

StartupSmart on Twitter StartupSmart on Facebook StartupSmart on LinkedIn

Subscribe to StartupSmart RSS feeds

Events


  • Manufacturing Resource Efficiency – A Forum for SMEs
    Discover how using your resources efficiently can lead to long term success for Australian manufacturers.   VECCI and Enterprise Connect would like to invite ...

  • B31: Ballarat Business Month
    B31: Ballarat Business Month – a month of dedicated small business events, workshops and seminars held in and around Ballarat – 1-31 August.   For up-to-date ...

  • Small Business Speedy Solutions
    Topline business tips in minutes. Mobile hubs showing short sharp videos on key small business issues and topics – metro Melbourne and regional Victoria t...

  • Small Business Heroes Exhibition: The Retailers
    Free, colourful and inspiring photographic display featuring candid images and stories of successful small business owners who are taking an innovative or...

  • Small Business BIG Marketing
    An inspirational and practical half day event incorporating seminars from leading business marketers, marketing services expo, networking opportunities and...

Sponsored Links

Our Partners

  • ANZ the only bank to offer government-backed first home saver accounts as CBA exits
  • Mortgage insurance provider Genworth welcomes wider customer know-how
  • Brisbane property market split as half rise and half fall in price
  • The Block auction a dose of reality, which Sydney finally loved
  • Balwyn takes top weekend calling