Households which have consistently spent more than they have earned since the early 1990s may be now acting more cautiously, the Treasury said today.The gap between what households spend and what they earn widened during the last decade as households lift
Households which have consistently spent more than they have earned since the early 1990s may be now acting more cautiously, the Treasury said today.
The gap between what households spend and what they earn widened during the last decade as households lifted their spending. In 2009, the gap between disposable income and spending rose to almost $13 billion, or 14% of household disposable income.
For now, the long upward trend in household debt seems to be turning and a slowdown in household borrowing has seen new house building fall to historically low levels.
"Changes in the tax mix, effective from October 1, are intended, in part, to promote saving, which will help reinforce the current shift in behaviour," the Treasury said in its monthly economic indicator report.
"We cannot be sure debt will continue to fall but if it does persist, not only might households feel more financially secure, but it might make room for the export sector to expand and place the overall economy on a more secure footing," it said.
In contrast to households, net business saving and net government saving have generally been positive over the last 20 years.
The Treasury said it is doubtful if further large increases in household debt over the years to come would be prudent.
"Household vulnerability to events, such as a fall of income, would continue to climb and, should financial markets have cause to change their exposure to that risk, leave households in a precarious position."
