A new Commonwealth Bank analysis paints a more positive picture of Australians’ finances than many people may feel.
It also examined household savings rates and found that Australians are now saving 10.8 per cent of their disposable income, up from just 0.3 per cent in 2005-06.
A 6.2 per cent rise in consumer spending in the past year, rising salaries and low unemployment round out its review of a solid 2012.
“There is an abundance of pessimistic news about the economy, particularly because the picture in Europe is bleak, and this can create a perception that doesn’t reflect some of the positive things happening in Australia,” CBA chief economist Michael Blythe says.
“It is tough for many consumers and businesses at the moment but the patchwork nature of our economy means some positive indicators might be missed.”
Blythe says the trend of saving more started in the mid-2000s but was given “a huge kick-along” by the global financial crisis.
He says most households are still pessimistic about the outlook, and this has been a key reason for the Reserve Bank’s interest rate cuts this year.
“The Reserve Bank is making it clear that they want to see more activity in the non-mining part of the economy, and housing is one of the areas they are looking to get moving.” It is estimated every $1 of spending on new housing generates another $1.31 of spending elsewhere in the economy.
Assist Finance chief executive Jason Di Iulio says the increased focus on debt repayment and savings illustrates that people are nervous about the economy and their jobs.
“They are reducing debt at the expense of luxury spending,” Di Iulio says.
The trend of maintaining mortgage payments at the same level even when rates are cut is a smart move, he says.
“It will reduce debt faster and take real advantage of the rate cuts,” he says. “If you have non-income-producing debt, you should be paying it off as fast as possible, which will benefit you later in life.”
CBA’s Blythe says building up a buffer in the mortgage is attractive for most people.