“People are in aggregate saving a little bit,no longer saving a lot. We have seen that number come down in recent times,” he said.
“We don’t need that number to tell us that people are doing it tough,but it’s another indication that they are.”
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Commonwealth Bank’s head of Australian economics Gareth Aird said the data was bad news for households,showing that while disposable incomes had risen slightly,interest and tax payments had skyrocketed,sending real household spending power backwards at a rate never seen before.
“Real household disposable income is down 5.6 per cent through the year,the worst outcome in the history of the national accounts which go back to 1959,” he said.
“Basically,we’ve never seen growth in inflation-adjusted income so weak.”
Aird pointed out interest paid on housing debt had skyrocketed by 70.6 per cent over the last year,and income tax payable soared by 23.4 per cent over the same period.
That increase in income tax payable – due in large part to bracket creep – meant an increasing number of workers were handing over more of their income to the federal government,he said.
“Against this backdrop,it is no wonder that consumer sentiment has been at levels consistent with a major negative economic shock for over a year,” Aird said.
Shadow Treasurer Angus Taylor said the figures showed middle Australia was being crushed by rising mortgage repayments,higher prices and increased taxes,and keeping next year’s stage 3 tax cuts as legislated was crucial.
“They need to proceed and they are really important reform,” he said.
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“Why? Because it means for the vast majority of Australians,over 95 per cent of Australians,they won’t pay more than 30 cents in the dollar – you’ll keep 70 cents of the dollar in their wallets. And it means when they work hard,they get to keep it.”
With ongoing economic pressures,Callam Pickering,Asia-Pacific economist for jobs site Indeed expects the household savings rate to fall further still in the coming months as households continue to struggle with the cost of living.
“Right now,the household sector is the biggest risk to Australia’s economic outlook,” he said.
“Even a small deterioration in labour market conditions,a reduction in population growth or a stabilisation in the household savings rate could quickly pull the rug out from household spending.”
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