This downturn has been different – instead of dipping into their savings, households have added to them in a material way. In the September quarter, the household saving rate surged to near 20 per cent as governments supported incomes at a time when it was hard to spend (Graph 5).
We estimate that the total additional savings by households during the pandemic has amounted to more than $ billion and many businesses have also increased their cash reserves. Provided people have the ability to spend – and the confidence to do so – these additional savings will support strong growth in consumption over coming months.