Australians are saving more. But for how long?

What is household disposable income?

Household income is defined as total money coming in from all sources, including wages, government payments, and investment returns, minus tax and mortgage interest payments. 

Savings bounce back after inflation shock

How much people save versus spend influences everything from retail sales to economic growth.

Based on Australian Bureau of Statistics (ABS) data, Australia’ household saving ratio, or the share of income that households save rather than spend, is sitting around its pre-pandemic level after bouncing back from the late-2022 inflation spike. CBA economists expect it to remain broadly steady over the next few years.

That matters because household spending drives almost half of Australia’s economy. 

“Super contributions and mortgage repayments have kept savings high, but we don’t expect these factors to push the saving rate much higher from here,” said Ashwin Clarke, Senior Economist at CBA.

Locked-away savings

Superannuation and mortgage repayments mean a big chunk of income is out of reach for everyday spending. Compulsory super contributions have risen from around 4 per cent in 1992 to 12 per cent today, and mortgage principal payments remain high as house prices and construction costs climb. These structural factors have kept gross savings elevated, even as households adjust to cost-of-living pressures.

Ageing and attitudes

More Australians are retiring, which should push savings down. But older people are working longer and reluctant to spend their wealth, offsetting that effect. Higher interest rates may also encourage some households to save more, though CBA economists say the impact is uncertain.

“Households have less accessible cash because of super and mortgage commitments, which has supported higher savings. That effect has largely run its course,” Clarke said.

Inheritance boom

A massive transfer of wealth is coming - about $3.5 trillion by 2050. Whether younger generations spend or save this windfall is unclear. For now, economists think this will balance out with other forces, keeping the saving rate steady.

“As these trends play out, the saving ratio will remain a key indicator of household behaviour and economic resilience. While we expect it to hold steady, cultural attitudes and generational shifts could change the story in ways that are hard to predict,” Clarke said.

Read Ashwin Clarke’s full report here.