The Rise in Household Saving

Between the early 1970s and the early 2000s, the aggregate household saving ratio in Australia declined steadily, from around 20 per cent to around zero (Graph 1). This trend was driven by a number of factors, including an increased availability of credit, falling real interest rates, more stable economic outcomes and rising asset prices, while changes in household income growth and expectations may also have affected the dynamics of the saving ratio over a run of years.1 The importance of these various factors waxed and waned over the three decades, but it is likely that all contributed to some extent to a higher rate of growth in consumption compared with income, and so to the fall in the saving ratio.