Household savings ratio

IBISWorld forecasts the household savings ratio to rise by 0.96 percentage points in 2025-26 to reach 4.99%. This trend follows the significant increase over the past year due to stabilising interest rates and easing cost-of-living pressures. Increased fiscal stimulus due to the May 2025 federal elections and expected rate cuts are set to boost the household savings ratio in 2025-26.

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 led to unemployed individuals drawing on accumulated savings to support basic living expenses. Additionally, the Reserve Bank of Australia (RBA) actively increased the cash rate as a means of tackling inflation from May 2022. This resulted in residential lending rates surging. In 2023-24, the household savings ratio fell to its lowest level in 16 years. Household savings depleted as interest payments rose. 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. The high cost of goods and services over the two years through 2023-24 also severely pinched consumers' savings.

More recently, the RBA has been slashing the cash rate since February 2025, which has supported mortgage holders and hence benefited savings rates. Easing inflationary pressures has also allowed households to save more. However, a lower cash rate also forces some banks to reduce their interest rates on savings accounts, discouraging savings and weighing on the household savings ratio. Overall, IBISWorld forecasts the household savings ratio to fall at an average annual rate of 1.79 percentage points over the five years through 2025-26.