Research Discussion Paper – RDP 2014-03 Household Saving in Australia


This paper investigates household saving behaviour in Australia, as well as the drivers behind the recent rise in the aggregate household saving ratio. Our results explaining differences in saving behaviour across households are consistent with theory and previous findings. As might be expected, households' saving ratios tend to increase with income, but decrease with wealth and gearing. Financially constrained and migrant households tend to save more than other households, all else equal. While saving differs substantially across age groups we find that, at least in part, this reflects differing circumstances.

Our results suggest that the rise in household saving between 2003/04 and 2009/10 was driven by changes in the saving behaviour associated with certain household characteristics, rather than changes in characteristics: households with less secure income and/or those vulnerable to asset price shocks, higher-educated households, younger households with debt and older households with wealth increased their propensity to save. While our results inform which households changed their saving behaviour, we are unable to definitively conclude what caused this change in behaviour. Our interpretation of these results is that precautionary saving motives, a reduction in future income expectations for higher-educated households, an effort to rebuild wealth after the financial crisis and changing attitudes to debt contributed to the rise in the household saving ratio, although other interpretations of the data are possible.

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