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Household saving in Australia

Author

Listed:
  • Finlay Richard
  • Price Fiona

    (Reserve Bank of Australia, 65 Martin Place, NSW 2000, Australia)

Abstract

This paper investigates household saving behavior in Australia, as well as the drivers behind the recent rise in the aggregate household saving ratio. Our results explaining differences in saving behavior 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. More at-risk households such as single-parent and migrant households tend to save more than other households, all else being 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 2003/2004 and 2009/2010 was driven by changes in behavior rather than changes in population characteristics: in particular, more educated households, as well as households with high debt and/or wealth increased their propensity to save. Our interpretation of these results is that a reduction in future income growth expectations for more highly educated households after the financial crisis, and an associated effort to rebuild wealth and repay debt, drove to the aggregate rise in household saving.

Suggested Citation

  • Finlay Richard & Price Fiona, 2015. "Household saving in Australia," The B.E. Journal of Macroeconomics, De Gruyter, vol. 15(2), pages 677-704, July.
    • Handle: RePEc:bpj:bejmac:v:15:y:2015:i:2:p:677-704:n:7
    DOI: 10.1515/bejm-2014-0077
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    6. Wei-Ting Pan, 2016. "The Impact of Mandatory Savings on Life Cycle Consumption and Portfolio Choice," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 32, July-Dece.
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    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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