CHART: Savings ratios in Australia point to looming household stress

Photo: Getty Images.

Australia’s household savings ratio is at levels last seen at the heights of the global financial crisis.

That’s not all, it hasn’t climbed for the past 12 quarters. That is the longest run since 13 consecutive quarters of no increase recorded between 1985 and 1988.

With wages growing slower than inflation, households are resorting to dipping into their savings to meet consumption and fuel their thirst for housing.

The trend is worrying policymakers and economists. Given an expected slowdown in house prices as mortgage rates rise, economists fear the savings ratio could drop further and hurt consumption.

Australian household debt has hit a record and the RBA, in its semi-annual financial stability review in April, noted about a third of mortgage holders have either no buffer or the capacity to meet less than one month’s repayments.

The savings ratio, which is a percentage of net savings on net income stood at 4.8% in the March quarter, the lowest since September 2008, data from the ABS showed.

The global financial crisis spurred households to cut spending and save. The measure soared to 9.8% in March 2012, the highest since 1986, according to ABS data.

Since then, it has only slipped as the housing boom took off.

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.