The venerable economists of the Melbourne Institute released their quarterly Household Financial Conditions survey yesterday and jeez we are unhappy. In fact, we were happier about our state of financial health in the midst of the greatest global economic crisis since the Great Depression:
The press release added that:
According to Dr. Edda Claus “the household financial conditions index plummeted 24.3 per cent in June to its lowest level since the start of the survey in March 2001. The index is down 25.3 per cent compared to a year ago”.
She added “This record low comes as a surprise as house price rises have been moderating and the unemployment rate is below 5 per cent. The proportion of respondents nominating ‘saving for a rainy day’ as their motivation for saving rose to 55.4 per cent, the highest since respondents have been nominating their motivations for savings since in May. This could indicate a fundamental change in consumer attitude away from accumulating toward paying off debt. But this could also indicate that consumers see weakness ahead in economic activity and hence increase their precautionary savings.”
The Melbourne Institute household financial conditions index shows the proportion of households who are saving relative to the proportion of households who are running into debt and/or drawing on their savings.
Whilst such surveys come with a pretty decent margin for error, there’s an accumulation of them that is becoming compelling. I had a chat today with Edda Claus and she explained that the survey was dragged down mostly by the finding that many Australians are having to draw upon savings to get by. The survey rises when people are able to save money more easily.
Also, the question about where punters would invest money if they had it, confirmed the findings of the Westpac consumer confidence survey of last week. 28.8% of respondents said they’d put the money in the bank, up from 26.1% in March but down from 30.5% in June last year.
Those nominating investment property fell 0.7% from March to 11.3% in June, and was down 1.1% from June last year.
Those nominating shares to 8% in June from 9.1% in March but was up from 6.1% year on year.
Cash is king.
