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Households Hold a Mirror to the Economy and Sit Steady for the Quarter

Monday, 15 July 2013

The June St.George-Melbourne Institute Household Financial Conditions Report released today showed that the majority of Australians are in a steady financial position as they reach the half-way mark of 2013. In the June survey, 82.0% of households indicated they were in stable financial position, with 43.6% managing to put savings away.

 

Looking at the motivations behind saving for Australian households, the priority to put money aside for holidays came in as number one, a position which has been held in each Index over the past year from June 2012. Moving up the list this quarter was the motivation to save to purchase a new car; this was supported by a visible increase in households holding car finance debt, (from 13.6% to 16.2% since March) with consumers looking to take advantage of favourable loan rates and showing a confidence to spend their savings.

The St.George-Melbourne Institute Household Financial Conditions Index lifted modestly since March, with a 1.1% improvement in conditions, mirroring the below-trend growth of the national economy. This status was echoed across key areas of the survey, although some felt the pinch of industry slowdowns.

Chief Economist at St.George, Hans Kunnen, explained, “Employment conditions have been improving in the part-time and casual sectors, which favour the 18-24 year old age group and as a result, their conditions have jumped 13.9% since March. An improvement of 5.0% in conditions for women has also been achieved, likely due to mothers of young children making up a portion of the part-time workforce.”

“Those who didn’t end the quarter on a positive note were the 25-44 year olds with a 5.1% decrease in their conditions; potentially this matches the decline seen in the paraprofessional and trade sectors of 10.2% since March. These results may be partly attributed to the slowdown in mining,” Kunnen continued.

In a surprising development, tenants saw the greatest improvement in their financial conditions, with a 12.9% increase since March. Despite lower mortgage rates, mortgagees experienced a decline of 10.8% in their financial conditions; however, fewer households held mortgage debt, with this category declining to 36.6% from 38.8% over the quarter. The majority of states also experienced increased outright home ownership, suggesting greater ability to pay off mortgages entirely.

General Manager, St.George Retail Banking, Andy Fell said, “At the halfway point of 2013 we are pleased to see that 82.0% of Australians households are in a stable position with their financial conditions with many also managing to put savings away.”

“It is also positive to see the trend continuing in motivations to save, with holidays remaining number one on the list again this quarter. We also saw the motivation to purchase cars on the increase, showing that households are being assertive about setting their goals and working towards achieving them during what is currently a favourable economic climate,” he continued.

As a means to save, banks remain the most popular channel for 86.2% of respondents. Superannuation remained as the second most popular form of investment asset, moving from 77.9% to 80.0% since March.

Key Findings

  • The St.George-Melbourne Institute Household Financial Conditions Index rose 1.1% to 125.7 for the quarter from March to June 2013.
  • 82.0% of Australian households are in a stable financial position, with 43.6% managing to put savings away during the last quarter.
  • The financial conditions of the 18-24 age bracket increased 13.9% from March 2013 to June 2013. For 25-44 year olds they declined 5.1%.
  • Paraprofessionals/trades and sales/clerical occupations saw a 10.2% decline in their financial conditions from March 2013.
  • At a state level, Victoria experienced the greatest change in conditions, improving 10.1% over the quarter. SA had the largest decline, an 8.1% fall since March.
  • Conditions for females improved 5.0% from March; males experienced a decline of 2.7%.
  • 58.6 % of respondents were motivated to save for holidays; this has been a steady No.1 motivation since June 2012, increasing from 51.6% over the year.
  • 42.0% of households indicated they were debt free, this is up from 40.0% recorded in March. There has been an increase from 60.0% to 63.1% of those who are able to service debt at the lowest level (contributing 0-10% of their after tax income to debt).
  • The share of households holding mortgage debt has decreased further this quarter, to 36.6% from 38.8% of respondents in March.
  • Car finance (including leasing) experienced an increase from 13.6% to 16.2% of respondents from March to June.
  • Deposits with banks and similar institutions remain the preferred method to save at 86.2%; likewise banks continue to be the most popular means to save, with 34.0% of respondents saying they would invest hypothetical savings this way.
  • Superannuation as a savings method increased from 77.9% in March to 80.0% in June.

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 gathered in June 2013, further quarterly results will be released in September in 2013.