Bank savings diminish as Australians heads for terrifying moment

It was a Covid trend that saw Aussies feel wealthy – but now the bubble is about to burst and data shows we’re not prepared.

Do you live rich or are you rich? Some people spend like a rich person; other people don’t spend at all, in order to have the bank account of a rich person.

We all know someone whose car is leased and who has one pair of brand name shoes they wear all the time. They look loaded. But they are financially stressed. When their phone bill comes, it is a drama.

Other people are wearing Anko but their ATM receipt reveals they have $50,000 in their spending account. They don’t live rich. Not to the outside observer. But financially they are in a field of clover. Bills come and go, paid by direct debit without them even noticing.

Australians saving habits are front of mind as the economy starts to close in on us.

New data from news.com.au’s Great Aussie Debate, which surveyed 50,000 people, shows a lot of Australians have next to nothing. 13.3 per cent said they had $0 in savings, and another 5.5 per cent of people had under $1000. That won’t go very far in this era of $400 grocery bills, $200 tanks of petrol and $300 powerbills.

Women are more likely to be broke, with 16 per cent of women declaring they had nothing in the bank, compared to 11 per cent of men. 28 per cent of men said they had over $50,000, compared to 17 per cent of women

As the next chart shows, the age group most likely to have $20,000 to $50,000+ is the over 70s. But the 30-49 groups are the most likely to have over $50,000. Presumably that’s a house deposit in waiting for some of those people, or money in their offset account.

Saving had been the national pastime for the previous three years. During Covid people filled their bank accounts with money, hand over fist. Business owners in particular. They pocketed tens of thousands in cashflow payments and JobKeeper payments.

But all those savings have been run down. At first slowly, then quickly, as the price of everything has gone up. Australia’s savings are growing far below their long term average growth rate, as the next chart shows. Of the money we’re earning, we’re saving less of it.

You might expect the amount of money in banks to keep up with inflation. If not it is shrinking in real terms. You’d also hope it was keeping up with population growth. If not it is shrinking in per capita terms.

But in Australia the rate of growth of deposits in the bank is just 4 per cent over the last year. That’s slower than the current inflation rate of 4.9 per cent and the slowest 12 month growth since 2020, as the above chart shows.

Here’s another series that shows savings all the way back to the 1960s. It reveals that our current saving rate is way less than at any time excluding the late 1990s, early 2000s.

Basically we’ve only ever saved this little once before, in a weird, greedy little period that led directly up to the global financial crisis.

More and more of us are running down our bank accounts to preserve our lifestyles, or at least something resembling our old lifestyles.

But how long have we got until our money runs out? And what sort of Christmas are we going to have this year if families are choosing between presents and going broke? It’s a terrifying moment in the nation’s economy.

Jason Murphy is an economist | @jasemurphy. He is the author of the book Incentivology.