Crisis prompted savings account withdrawals

The financial crisis prompted many people to withdraw cash from their savings accounts, it has been discovered.

According to the Reserve Bank of Australia (RBA), some $4 billion is being hoarded by people who made a "panic run" to withdraw funds when the recession hit.

People began to take money out of their bank accounts, including high interest savings, at the peak of the crisis in September and October last year.

As a result, the RBA reported a shortfall in $50 and $100 notes and was required to print more to cope with the demand.

While normally a five per cent increase in banknotes in circulation is experienced every year, the last three months of 2008 saw this figure increase to 19 per cent.

This revelation comes as part of the institution’s annual report published this week. It stated the developments in financial markets reduced the nation’s "financial risk appetite".

"One manifestation of this was that public demand for currency increased as households made large cash withdrawals from financial institutions," the report concluded.

Conversely, news from the Melbourne Institute this week revealed people are saving more money, which, it stated, is a positive sign for the economy since people have more disposable income.

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