Family Budget Squeeze
The picture of the family budget is clearer after yesterday’s National Accounts. And that is collectively, we have pulled our heads in. Something spooked our spending in the three months to September, the household final consumption expenditure it was the lowest in more than 12 years.
And its pretty easy to see what spooked us. First – energy prices. Dire forecasts of blackouts and sky rocketing bills. We haven’t got through the summer yet mind you, but over the top electricity bills have nobody cheering.
Next – interest rates. The word in September was that the Reserve Bank would raise rates to match overseas. Now, didn’t happen but by banks raising interest-only loans, and also rates for investors, did nothing for many families cash flow.
Finally – house prices. Regulators deliberately sought to cool Sydney and Melbourne prices with new rules and regulators that worked. Sydney is now falling, Melbourne growth is slowing fast, it’s the perfect recipe to get people to stop spending.
Because cash is tight around many households, this also happened – you can see here – falling household savings ratio over the past eight years or so.
Right now, 3.2 per cent – a third of what it was in the aftermath of the Global Financial Crisis – part of this is households taking on bigger debts because of lower interest rates to afford bigger mortgages. But part of it is the squeeze on family budgets, which means we are spending more and saving less to maintain our standard of living.
The other part of this is your wages, which as we know, have been growing more slowly, than since records began.
Well, now, there is a glimmer of hope. The compensation of employees, which picks up overtime etc,is starting to rise. This might be the hope to take some of the pressure off that family budget.
Overnight, the Dow Jones Index up by 17. The Dollar 75.66 US Cents.
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