Consumers boosted savings by almost 50% during COVID: CBA

A new report from the Melbourne Institute: Applied Economic & Social Research and CBA, based on transactional data from 5 million customers, has found that over the March quarter, savings balances were stable year-on-year, but up by almost 50 per cent from the same period in 2020.

The median annual inflows and income for consumers had stayed largely unchanged, but median outflows and expenditure had risen by $1,600 year-on-year, as consumption rebounded.

CBA has recorded the current savings rate as 13.6 per cent of household disposable income.

Melbourne Institute professor John de New commented consumers were responding to what was happening around them, particularly as interest rates began to move.

“Driven by concerns around inflation and its impact on household spending, as well as the impacts on mortgage repayments, Australians have continued to grow their savings’ safety nets and curb spending at a sustained pace,” Mr de New said.

The report rated consumers’ financial wellbeing on a scale from zero (low) to 100 (high), across 12 months of data.

As at March, the average financial wellbeing score was 50 out of 100, down 1.1 points from the peak a year earlier, but 2.6 points higher than two years ago – boosted largely by amassed household savings and reduced expenditure through the pandemic.

As the report noted, the Australian Bureau of Statistics’ (ABS) household saving ratio (net saving as a percentage of household net disposable income) has remained high since June 2020, at around two to four times higher than pre-pandemic levels.

However, a slight uptick in spending slightly dragged the financial wellbeing average year-on-year.

The report pointed to a 1 percentage point increase in the proportion of Aussies with “below average savings”, or savings more than one standard deviation below the median for their age.

CBA head of financial wellbeing Ben Grauer commented that building a savings buffer seemed to have helped offset external pressures.

Mr de New added: “Despite the pandemic, many Australians experienced quite healthy monthly inflows of income during this reported period.

“When we look at this measure alongside what is happening in our economy and the elevated levels of precautionary savings being accrued, it tells us that Australians are doing the right thing and preparing for possible impacts to their finances.”

Around two-fifths of consumers (36.8 per cent) were reported as “getting by”, with financial wellbeing scores ranging between 55 to 80. This was less than a year earlier, when it was 37.8 per cent of all consumers.

Meanwhile 28 per cent of consumers were classified as “just coping”, with scores between 30 to 55, compared to 28.7 per cent a year earlier.

Fewer people felt they were “doing great”, with scores greater than 80, at 14 per cent in March 2022, compared to 14.5 per cent in March 2021.

More people were “having trouble” year-on-year, with scores less than 30, at 21.2 per cent of all consumers, compared to 19 per cent in March 2021.

But the cohort had declined from two years earlier, when it was 23.2 per cent of consumers.

“Given increased outflows and expenditure with relatively flat inflows and income, it is unsurprising to see a slight increase in the size of the ‘having trouble’ category as savings balances are slowly being reduced due to higher spending,” the report said.

[Related: New home loans sink across board over April: ABS]