Are we spending or saving more money? APRA data tells some of the story

The Australian Prudential Regulation Authority (APRA) has released new market insights this week that show changing Australian financial habits over January-February. While the global economy is understandably reeling from recent events, it's important to take stock of what’s going on at home, too, and what this means for the rest of 2022.

Australian residential loans increased by $15.5 billion (0.5%) in January 2022, helped enormously by a $9.1 billion (0.7%) spike in home-ownership. Home investment loans also jumped by a further $2.4 billion (0.4%). Altogether, these numbers suggest that more and more Australians are taking out home loans and purchasing property. 

Westpac cautions that the outlook seems mixed at best for first-time buyers hoping to break into the market, however, since many buyers are assuming house prices will continue to rise well into 2023. With sales rates still going strong, consumers are increasingly pessimistic about whether they can afford a house.

However, more houses than ever appear to be going on the market. If the number of prospective buyers dwindles or holds, we may see an important shift that could drive property prices down in the long-term.

Despite being dogged by staffing shortages and supply-chain issues, Australian businesses have reasons for optimism. APRA reports that non-financial business lending increased by $4.6 billion (0.5%) over the course of January, which combined with the imminent easing of public health restrictions may result in better business confidence and spur growth down the track.

APRA has reported that credit card lending was down significantly - $1.2 million (or 4.2%) in January. This complements Corelogic’s earlier announcement that credit scores have increased across the board in 2021, indicating that Australians are tightening their belts and paying off their debts. 

Consumer trends suggest credit cards have been falling out of favour during the pandemic, especially compared with other popular lending services like Buy Now Pay Later. Given this, it’s no surprise that debt has plunged as much as it has. (But, it’s important to keep in mind that most BNPL services require a card or some form of account, so there hasn’t been a departure from the concept of credit cards).

Other forms of household lending, such as fixed-term personal loans, declined by $0.3 billion (or 0.4%), which  further supports the idea that Australians are conserving their expenses to boost their savings.

Elevated financial pressures related to omicron, unemployment, and the rising cost of living have Australian consumers more than a little skittish. 

According to Westpac, the Consumer Price Index (CPI) has undergone several bumps since mid-2021, worsened by surging demand and unreliable supply-chains. A higher CPI hits vulnerable groups like young people, renters, and retirees the hardest, since low-incomes tend to be the most sensitive to changes in the cost of living. 

Given that many consumers also expect the Reserve Bank to hike variable interest rates on their mortgages, there’s understandably little incentive to splurge. 

Instead, Australians are choosing to protect their finances by padding out their nest eggs. Household deposits increased by $6.5 billion (or 0.5%) over the course of January, further highlighting the desire to put money away for safekeeping in times of high uncertainty.

If you’re interested in boosting your savings, check out our top-rated saving accounts and tips on how to budget your money – even when you’re working from home. You can also compare savings accounts below.