Australian debt down in time for Christmas spending rush

Australians are saving more, with eight out of ten Australians currently adding to their savings, or at least not dipping into them.

According to the St. George-Melbourne Institute Household Financial Conditions Report, the proportion of Australians needing to draw on their savings or running into debt dropped to 17.7% over September, the lowest figure recorded in nine months.

The trend can be attributed to extended periods of low and stable interest rates, stemming from the RBA’s decision to leave the official cash rate unchanged at 2.5% since August 2013.

Low interest rates have also encouraged Australians to pay off their existing debt. Households using more than 25% of their after-tax income to repay or service their debt rose by 8.8 percentage points to 22.8% during September.

The summer break seems to be a big factor in the decision to save and take control of debt. More than half (60.7%) of survey respondents were saving for holidays or travel, and 32.6% had started putting money away for Christmas presents.

“With the holiday season in sight, it’s likely Aussies are setting aside extra cash to enjoy a well-deserved break,” St. George retail banking general manager Andy Fell said.

Many savers are looking beyond January 2015, with 56.6% putting some of their savings away for a rainy day, and roughly one in five financially preparing for a major purchase such as a car (22.4%) or expensive items for the home (20.3%).

If you’re one of the many Aussies stashing cash away for the Christmas break, make sure you search the savings account market for a good deal.