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Debts down, savings up: Aussies prepare for big ticket purchases

Monday, 27 October 2014

Financial conditions are on the rise with eight out of ten Australian households managing to add to their savings or at least making ends meet, the highest in nine months, according to theSt.George-Melbourne Institute Household Financial Conditions Report, released today.

Financial conditions are on the rise with eight out of ten Australian households managing to add to their savings or at least making ends meet, the highest in nine months, according to theSt.George-Melbourne Institute Household Financial Conditions Report, released today.

The proportion of Australian households running into debt or needing to draw on their savings has decreased to 17.7 per cent, the lowest in nine months, as households continue to build their cash buffers during the extended period of low interest rates.

With more savings in the bank, Australians are hungry for higher returns for their savings, by investing in other asset markets such as real estate. The proportion of Australians holding investment property is at the highest ever recorded since the survey began in March 2001, rising to 23.3 per cent.

General Manager, St.George Retail Banking, Andy Fell said the results are a good sign that Australian families are motivated to pay off their debt quicker, with a rise of 1.4 percentage points, compared to last quarter.

“We’ve seen a small jump in households being able to save a lot, with a 1.2 percentage point increase from last quarter. Deposits with banks remain the most popular form of savings with households, rising to the highest since the start of this survey in March 2001,” he said.

So, what are Australians saving for? Holidays and a rainy day are the key saving motivators for households, with more than half (60.7%) saving for holidays or travel, followed by saving for a precautionary rainy day (56.6%).

“With the holiday season in sight, it’s likely Aussies are setting aside extra cash to enjoy a well-deserved break. We’re also seeing nearly a third (32.6%) of households put savings aside for Christmas presents, while around one in five are preparing to purchase big ticket items like buying a car (22.4%) or expensive items for the home (20.3%),” Andy said.

Chief Economist at St.George Besa Deda commented that September results are a continued trend from last quarter with lower interest rates easing the pressure off debt repayments, which puts households in a better position to reduce their debt. 

“The good news is the majority of Australians with debt continue to have very manageable levels with most households reporting debt service levels of 10 per cent or lower, however this declined 4.9 percentage points from June to 61 per cent in September. 

“While we’ve seen an improvement in financial conditions overall, seniors (aged 65 and over) were the only age group to report a decline in their financial conditions, dropping by seven per cent to 108.8 this quarter. The low interest rates could be impacting their savings plan as this age group tends to rely more on interest income,” she said.

Key Findings:

  • The St.George-Melbourne Institute Household Financial Conditions Index rose 2.3% to 125.5 in September, following an increase of 0.4 per cent in June. The index is now 1.3% below its value a year ago. The rise in the index reflects changes in saving behaviour.
  • Deposits with banks remain the most popular form of savings. In September, the proportion of respondents reporting that they hold this form of savings was at its highest since the start of the survey.
  • The proportion of respondents holding investment property rose 3 percentage points to 23.3%, the highest ever recorded since the survey began in March 2001.
  • The proportion of households that are running into debt or needing to draw on their savings was at 17.7%, the lowest in nine months.
  • Households that are managing to make ends meet or are adding to savings increased to 81.9% as a proportion of total households, the highest in nine months.
  • Those over 65 years were the only age group to report a decline in their financial conditions. The index for those aged 65 and over declined 7.0%.
  • Mortgage remained the main form of debt reported by most respondents in September at 36.6%, but fell from 39.4% in June.
  • Debt servicing (including repayments) has increased for households that hold debt. Households using more than 25% of their after tax income to repay or service their debt increased by 8.8 percentage points to 22.8%.
  • Saving for ‘holidays/travel’ and for ‘a rainy day’, reached their highest levels since March 2005. 60.7% of respondents mentioned saving for ‘holidays/travel’ as their main motivation while 56.6 % indicated ‘a rainy day’ as their next motivation to save.
  • Saving to buy a car rose 4.1 percentage points to 22.4%, the highest since June 2005.
  • A large proportion of households continue to report some form of savings. Those reporting “no savings” edged up 0.1 percentage point to 2.0% of all households in September, and remains near the historic low recorded in June 2010.
  • The proportion of households which don’t have debt declined 2.7 percentage points to 39.6%, the lowest in 2½ years.
  • Results of the financial conditions index across the states were mixed with rises in September compared to June recorded in New South Wales (11.2%), Victoria (4.1%) and Queensland (3.6%), while decreases were noted in South Australia (-10.7%) and Western Australia (-9.7%).

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 September 2014, further quarterly results will be released in January in 2015.
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Media contact:


Dianne Edwards
St.George Bank
P: 02 9236 3521
M: 0405 623 014
E: edwardsdi@stgeorge.com.au