Household finances deteriorate - survey

THE financial position of Australian households has deteriorated to its lowest point since 2001, a survey measuring household savings shows.

THE financial position of Australian households has deteriorated to its lowest point since 2001, a survey measuring household savings shows.

The Melbourne Institute household financial conditions index fell to 25.2 points, its lowest level since the start of the survey in March 2001.

The March 2011 survey recorded an index of 33.3 points.

The household financial conditions index shows the proportion of households who are saving relative to the proportion of households who are running into debt or drawing on their savings.

Research Fellow at the Melbourne Institute, Edda Claus was surprised by the result because house prices have been moderating and unemployment has fallen below 5 per cent.

"This could indicate that consumers see weakness ahead in economic activity and hence increase their precautionary savings," Dr Claus said.

The most popular reason to save in the survey was for a holiday or travel, with 58.7 per cent citing this reason, almost level with March.

The second most popular reason for saving was "for a rainy day or a precaution", with 55.4 per cent , down 0.2 per cent from March.

Repaying debt and paying bills was the third most popular reason for saving, with a response of 46.0 per cent, a jump from 41.6 per cent in the March survey.