Bulletin – June Quarter 2014 The Rise in Household Saving Abstract

This article investigates household saving behaviour in Australia and the drivers behind the sharp rise in saving that occurred in the late 2000s after an extended period of decline. Saving behaviour is important as, among other things, it influences household consumption, which accounts for a little over half of GDP. The rise in household saving appears to have been underpinned by precautionary motives, a reduction in expected future income gains for some types of households and an effort to rebuild wealth after the global financial crisis. Also, the long transition to higher levels of indebtedness may have run its course over this period, including perhaps because of a change in attitudes to debt. The ageing of the population does not appear to have played a significant role in recent changes in the saving ratio, although it may place downward pressure on saving over the years ahead.

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