Australians are spending less and saving more, not only because they became worried by the impact of the global financial crisis (GFC), but also because many baby boomers now realise they will not have enough to fund their own retirement.
That is one of the findings of a research paper released by AMP Capital Investors this week, in which its head of macro markets Simon Warner joined with portfolio manager Andrew Scott to investigate the phenomenon of the Australian "conservative consumer".
Their research paper – Australian Retirement Funding and the Savings Ratio – pointed to the level of unease and changed behaviour in the household sector that has occurred within what is described as "a generally positive macroeconomic backdrop".
Warner and Scott point to suggestions that Australian consumers will become less cautious as the economy improves, but warn that this might not ultimately be the case in circumstances where those aged over 50 have experienced almost the perfect storm with respect to the impact of the GFC on their retirement goals.
"When the household sector does look forward, the scale of underfunding for retirement goals under a variety of realistic scenarios has the potential to generate continuous upward pressure on the savings rate in Australia," they said.
"It seems possible that the standard norms of what constitutes ‘adequate’ savings – such as historical levels of savings rates, debt to income, or debt to assets – are on their own insufficient metrics to utilise in understanding the current savings rate dynamic," the research paper said.
"The increase in the savings rate has been meaningful, and our analysis suggests that the current savings rate may have reached long run equilibrium levels," it said. "However, investors should be aware that in our judgement the risks around the savings rate remain to the upside."
