Australia’s household savings ratio – the rate of household savings from household net disposable income – shot up to 4.8% over the September quarter, according to the Australian Bureau of Statistics (ABS).

This is sharply higher than the 2.7% it was in the June quarter, and is the highest it has been in over two years.

household saving ratio

Source: ABS

The ABS report attributed the sharp rise to the 2.5% growth in household disposable incomes, which was driven by a fall in income taxes – largely a result of the government’s low and middle income tax offset of up to $1,080.

This vastly outpaced household consumption spending growth, which was only 0.1%.

“The reduction to tax payable did not translate to a rise in discretionary spending, which led to a visible impact to household saving,” said ABS Chief Economist Bruce Hockman.

Treasurer Josh Frydenberg admitted as much on ABC’s 7.30 interview with Leigh Sales last night.

“You point out at the start of your answer that disposable income’s up, but that goes back to my point, which is people aren’t spending it, because they’re worried, they’re uncertain, they’re using it to put into their savings.”

Leigh Sales

“Well, they’re doing what the Government is doing, and that’s paying down their debt. And in fact, 70 per cent of people with mortgages are more than a month ahead of their prepayments…”

Josh Frydenberg

“But that doesn’t stimulate the economy.”

Leigh sales

“But it’s not my job to tell Australians how to spend their money, my job is to give them more money to spend or to save.”

Josh Frydenberg

The sharp rise in saving occurred despite the Reserve Bank of Australia’s June and July cash rate cuts, which were expected to stimulate the household consumption.

As a result of the cuts, interest rates on many savings accounts fell by 50 basis points, sometimes more, leaving fewer options for those hoping to earn a real return (that is, more than inflation) on their savings.

The table below displays a snapshot of savings accounts in Australia with some of the highest interest rates on the market:

Provider

02000$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]More details
No monthly fees
  • Download the App to open your account
  • Get better visibility of your spending within App!
  • Deposit $200 per month to activate bonus interest
No monthly fees

Save Account

  • Download the App to open your account
  • Get better visibility of your spending within App!
  • Deposit $200 per month to activate bonus interest
010000$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]More details

Savings Maximiser (<$100k)

    010000$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]More details

    Boost Saver

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      All products with a link to a product provider’s website have a commercial marketing relationship between us and these providers. These products may appear prominently and first within the search tables regardless of their attributes and may include products marked as promoted, featured or sponsored. The link to a product provider’s website will allow you to get more information or apply for the product. By de-selecting “Show online partners only” additional non-commercialised products may be displayed and re-sorted at the top of the table. For more information on how we’ve selected these “Sponsored”, “Featured” and “Promoted” products, the products we compare, how we make money, and other important information about our service, please click here. Rates correct as of May 24, 2024. View disclaimer.

      According to the data, the economy grew by 0.4% over the quarter and 1.7% throughout the year.

      Household consumption expenditure increased by 0.1% in the quarter, with the consumption of discretionary goods and services falling by 0.3%.

      Shadow Treasurer Jim Chalmers said the numbers released by the ABS yesterday were “humiliating” for the government.

      “After the release of last quarter’s figures Morrison claimed that the economy “would improve in the next quarter”, but quarterly growth has actually slowed,” Mr Chalmers said.

      “These growth figures are well below average, well below forecasts and well below what is needed to get wages growing again.”

      “Weak growth like this is the inevitable consequence of a Government with a political strategy but not an economic plan.”