New data has revealed that household savings are more important to Aussies than what has been previously reported. And, while it might not be the best news for retailers it is reassuring to know that households do have significant buffers should the economy slow down further.
The Australian Bureau of Statistics has released figures that add a further $88-billion to the GDP for the year to June and suggest that productivity may be higher than what was originally forecast. The ABS says that the proportion of house saving to disposable income now stands at 10.8% which is significantly higher than the 9.3% figure previously disclosed and its highest level since 1986. Analysts say that this difference in saving could be what is putting retailers under extra strain and the disposable income that may once have been used to fund shopping sprees and indulgences is now being locked away securely for a rainy day.
Optimists believe that the high savings rates and revisions by the ABS could be yet another reason for the RBA to consider more rate cuts before the end of the year. After all, a quick bout of research led us at http://www.bankwest.com.au/personal/savings-term-deposits/savings-term-deposits-overview revealed the affordability of online savings product. At the same time, revisions to data saw economic growth for 2010/11 rise to 2.4% from its original 1.9% while growth for 2011/12 levelled out at 3.4% and was not revised.
Labour productivity was one of the major topics of concern and brought with it a pleasant surprise with the gross value added per hour worked increased to 2.9%, ahead of the 2.7% that had been estimated. The black economy or what is considered underground production was also valued at $20.7-billion, which is a hefty sum that the government is losing taxation in. construction was reported to have made the biggest contribution to the black economy with $10.5-billion.
For those whose biggest saving concern is for retirement economic trends paint quite a different picture. It is estimated that, by the year 2020, many workers will have increased their superannuation contribution from 9% to 12%. The rationale provided by the federal government for this is that it will give people more income to retire with and put less pressure on the federal government to look after them financially.
According to research conducted over the last few decades the number of people over the age of 65 will increase from 3 million to 8 million, making the cost of the average pension go up. And, while aggregate savings are anticipated to increase to $500-billion, which is 0.4% of the GDP, taxpayers will be footing the bill through their super savings account.
Analysts believe that the push for 12% is an ambitious one, in light of the fact that most people are reluctant to part with 9%. According to other research people are compensating for their compulsory super contributions in two ways. One is by increasing their property debt and the other is not saving as much as they should in other areas.
Over the last two years reports have shown pre-retirees to have debts similar in size to what they had amassed in their super accounts and, when asked how they were going to use their super payouts the standard response was to pay off existing debts, after their travel and leisure plans. The model has begged some pertinent questions about super accounts fulfilling their purpose as, instead of giving people a nest egg to retire with, people are acquiring debts to make the savings and then using the savings to pay the debts off when they stop working. On a more positive note the increase in the number of people saving and the amount being saved is increasing and is reflective of a change in consumer financial behaviour so perhaps more responsible habits can be expected of the newer generations as they age.