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Aussies focused on saving for property

Australian households are running a tight ship when it comes to reducing debt and boosting savings, while more are directing their savings towards property.

Despite Reserve Bank figures showing household debt sitting above 150 per cent of disposable income, the St.George-Melbourne Institute Household Financial Conditions Report revealed that four out of 10 Australian households have no debt, and more than half are using 10 per cent or less of their income for repayments.

The report also shows that Australians are improving their financial position by directing their savings towards property, which was the only area of savings that saw an increase in the June quarter – lifting by 1.6 percentage points.

Credit card debt has fallen below 30 per cent for the third consecutive quarter, with 29.6 per cent of households saying they hold this type of debt for the June quarter. Prior to December last year, credit card debt had not fallen below 30 per cent of households since September 2008.

The proportion of households continuing to “save a lot” rose by 1.9 percentage points to 8.2 per cent over the quarter – the highest level since December 2013 – while 39 per cent of households said they were able to maintain some form of saving.

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Neelam Tandon, St.George Bank’s head of retail banking for outer metro and regional New South Wales, said overall household conditions rose 2.4 per cent in the June quarter – up 7.3 per cent from the same time 12 months ago.

“This is great news for households and shows the effect of mortgage rates declining in the first half of 2015,” she said.

“We’re seeing households not only reduce their credit card debt, but mortgage debt has fallen by 3.3 percentage points over the same period.”

Ms Tandon said more and more households appear to have strong debt reduction and savings plans in place.

“In previous quarters, we’ve seen more Australians draw down on their savings, representing an increased willingness to spend,” she said.

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“However, we’re now seeing households revert back to a cautious approach, with less people drawing on their savings and more people using the low interest rates to pay off their debt quickly.”

Aussies focused on saving for property
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