Household savings ratio

IBISWorld forecasts the household savings ratio to rise by 1.76 percentage points in 2024-25 to reach 3.62%. This trend follows strong declines over the past three years due to interest rate hikes and significant cost of living pressures eating into household savings. Increased fiscal stimulus due to the May 2025 federal elections and stabilising interest rates are set to boost the household savings ratio in 2024-25.

The COVID-19 pandemic limited the opportunity for households to spend while also driving savings higher as households became more cautious with their finances. However, the winding back of social assistance payments from March 2021 has led to unemployed individuals drawing on accumulated savings to support basic living expenses. Additionally, the Reserve Bank of Australia (RBA) has actively increased the cash rate as a means of tackling inflation from May 2022. This has resulted in residential lending rates surging. Wages have not grown at the same rate as rent and mortgage payments, forcing people to diminish their savings to repay their loans and finance their necessities.

Over the past five years, the household savings ratio has fallen to its lowest level in 16 years. The RBA's decision to increase the cash rate from May 2022 onwards has led to household savings depleting as interest payments have risen. The high cost of goods and services over the past two years has also severely pinched consumers' savings. Overall, IBISWorld forecasts the household savings ratio to fall at an average annual rate of 1.54 percentage points over the five years through 2024-25.