Evolving saver needs spur lender re-think

  • By Nitish Bhatt

The magnitude of disruption COVID-19 caused, is likely to be acting as a wake-up call to Australians leading to a greater affinity towards saving and now may be the time for lenders to rethink their deposit propositions, writes RFi Group’s Nitish Bhatt 

The latest ABS data reveals that the household saving ratio has decreased to 12 per cent over the Dec-20 quarter. 

The decrease is not surprising given the steady re-opening of the economy. 

What is surprising is how much higher it still is compared to historical levels. As a comparison point, the household saving ratio was 4 per cent in Dec-18. 

The magnitude of disruption COVID-19 caused, is likely to be acting as a wake-up call to Australians leading to a greater affinity towards saving.  

Understandable as the desire to protection oneself from future economic shocks starts to creep in after a contraction. This is further highlighted as historical analysis reveals that the last time we experienced a significant increase in the saving ratio was right after the Global Financial Crisis (GFC). 

In fact, since the GFC the saving ratio has remained at heightened levels. 

Another metric that highlights the extent to which contractions impact consumer behaviour is the composition of household assets. 

Whereby in times of economic contraction the share of currency and deposit linked assets increase. 

This is exactly what is taking place in the market currently despite the ultra-low-rate-environment. 

The primary reason why Australians are currently saving is to have a financial buffer/safety net, as per the latest Feb-21 RFi Group Australian Savings & Deposits Council (ASDC-S) survey. 

This is a biannual survey of 2,000 nationally representative savings account holders. 

Source: RFi Group 

Furthermore, when looking at savers intent for the next 6 months, the proportion of savers intending to increase the amount they deposit into their savings each month has continued to trend upwards jumping significantly over between Sep-20 and Feb-21. 

Source: RFi Group 

All signs indicate that there will be sustained if not growing demand for deposit-based products in the near future. 

Hence now is a good time for banks to be rethinking their deposit proposition and focusing on addressing the key needs in the market. 

This is a key focus area for RFi’s latest February report based on the  Australian Savings Deposti Council  survey. The report aims to answer the following key questions:

• How has the savings and investing landscape changed over time? 

• Does encouraging good savings behaviour have an impact on banks bottom line?

• How can banks encourage good savings behaviour?   

This report will be available towards the end of  March.  

Nitish Bhatt is a lead analyst with RFi Group.