Dr. Shane Oliver     

The new age of consumer thrift

29 October 2010

• The global financial crisis has ushered in a period of more cautious consumers in the US and to a lesser extent in Australia. Household savings rates are likely to be higher than over the last decade as households seek to cut debt ratios in the face of reduced credit availability, greater economic uncertainty and constrained wealth.
• This will result in a more constrained and fragile recovery in the US. In Australia, consumer restraint is likely to be offset by mining sector strength, which is arguably necessary if the economy is to avoid overheating.
• Over the last decade, real growth in consumer spending in Australia averaged 3.50% p.a., which was above average gross domestic product growth of 3.00% p.a. Going forward. real growth in consumer spending is likely to average 2.75% p.a., with rising spending on health, education and utilities likely to see slightly weaker growth in real retail sales.

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