Crisis looming without boost to savings
The low level of Australia’s household cash savings could prove a major crisis for the country in the future, theFinancial Planning Association(FPA) has warned.
In a major new report released today, the FPA warned that unless the level of cash savings are lifted dramatically, retiring baby boomers will put an enormous fiscal strain on public funds in the not-to-distant future.
The report, complied by the National Centre for Economic Modelling (NATSEM) on behalf of the FPA, found that cash savings held by the average household have fallen by 6 per cent per year since 1993.
By comparison, the report found the amount of savings held by the average household in the sharemarket grew by 14 per cent since 1993.
However, the report also found that share ownership was concentrated in wealthier households, with just under 90 per cent of shares owned by the wealthiest 20 per cent of households.
“The different growth rates [between cash and shares] have resulted in cash deposits becoming less important in the average wealth portfolio and shares becoming much more important,” the report says.
The report also found that overall, the average wealth of Australian household has increase by 41 per cent since 1993.
According to the report, equity in the family home is the biggest contributor to wealth for most households, accounting for 55 per cent of their total wealth portfolio.
Superannuation is the next most significant asset, accounting for 20 per cent of wealth for the average household, and making up almost all of the wealth of the least affluent 20 per cent of households.
“The introduction of compulsory super has helped to ensure that all households have some savings. However, people need to also focus on their consumption patterns and level of voluntary saving,” FPA chief executive Ken Breakspear says.
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