The Melbourne Institute household financial conditions index fell to 25.2 points in June, its lowest level since the start of the survey in March 2001. The March 2011 survey recorded an index of 33.3 points.
Belt-tightening is becoming the norm for many as a series of price increases erode many families' budgets. Water, power and gas prices are going up in most states, while the summer's floods restricted supplies of many fruit and vegetables with lingering effects for many produce costs.
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The household financial conditions index shows the proportion of households who are saving relative to the proportion of households who are running into debt or drawing on their savings. The survey tapped responses from 1200 households nationwide.Research Fellow at the Melbourne Institute, Edda Claus was surprised by the plummeting savings gauge because house prices have been moderating and unemployment has fallen below 5 per cent.
"This could indicate that consumers see weakness ahead in economic activity and hence increase their precautionary savings," Dr Claus said.
''We think there is more uncertainty in the economy, domestically and globally,'' Dr Claus said, adding that the institute's surveys have tended to paint a gloomier picture than some others.
'Rainy day' savings
The most popular reason to save in the survey was for a holiday or travel, with 58.7 per cent citing this reason, almost level with March.
The second most popular reason for saving was "for a rainy day or a precaution", with 55.4 per cent , down 0.2 per cent from March. The ''rainy day" reading was the highest since the survey began including respondents' motivations for saving in May 2005, the Melbourne Institute said in a statement.
Repaying debt and paying bills was the third most popular reason for saving, with a response of 46.0 per cent, a jump from 41.6 per cent in the March survey.
AAP, with BusinessDay
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