Australians tipped to be saving more of their incomes in the next three years

Australians tipped to be saving more of their incomes in the next three years

Australians are hanging on tight to their money, with savings levels tipped to stay high in the next three years, new IBISWorld research found. 

While the budgets of many families and workers have been hit hard by the pandemic, others who have kept their jobs have managed to remain financially secure, and are taking action to protect their finances

Household savings as a proportion of gross disposable income jumped to 7.9 per cent in 2019-20, compared with 2.7 per cent in the year prior, according to new data from IBIS World.

“As with the post-GFC recovery, savings are likely to remain at elevated levels for at least the next three years. Consumers are likely to spend cautiously as they did after the GFC (global financial crisis),” the research firm found.

IBISWorld senior industry analyst, Matthew Reeves, attributed the surge in savings rate partly to the temporary relief in housing cost payments.

“The largest component of household expenditure is rent and other housing costs such as mortgages,” he said.

“Rent and mortgage relief provided by landlords and banks since April 2020 has constrained spending in this area, which accounts for 20 per cent of total household spending.”

Household net savings ballooned to a staggering $42 billion from $7.1 billion in the June quarter, data from the Australian Bureau of Statistics (ABS) found, as Australians spent $35.2 billion less due to temporary business shutdowns.

Government stimulus propped up family incomes: RBA

Reserve Bank of Australia’s deputy governor, Guy Debelle, noted that household incomes did not tumble along with gross domestic product and employment declines, which he described as “remarkable and highly unusual”.

“Normally in recessions, household income falls along with the decline in output and employment,” he said, speaking at an online conference run by Australian Industry Group on Tuesday.

“This time that hasn't happened because of the income support from the government through JobKeeper and JobSeeker.” 

Dr Debelle also attributed the rise in improved cash flows to superannuation withdrawals, lower interest rates and financial support from the banks. 

He argued that if the government had not provided financial stimulus, financial hardship would have been worse for many.

“The fact that household income rose in the quarter does not mean that the stimulus was overdone,” he said.

“That households saved a large amount of this income support means that their balance sheets are in a considerably better place than would normally be the case in a recession. They are better placed to support the recovery as it unfolds.

“The transfer from the strong balance sheet of the government to bolster the balance sheet of the household sector is an entirely appropriate and timely policy response.”

Money goals shelved during COVID-19

While some have been fortunate enough to bump up their savings in a recession, many other Australians have been making financial sacrifices, with major money goals being put on ice.

A third of Australians had no choice but to use their life savings to survive since the onset of the pandemic, a MyState Bank commissioned survey of more than 1,000 showed.

One in 10 of those who dipped into their savings say they have wiped out more than half of their nest egg.

Of those who were forced to spend their savings, nearly a quarter indicated that they originally planned to use those funds for a first home deposit. One fifth were saving for their golden years, while 25 per cent said the money was supposed to go towards a holiday.

“The economic implications of COVID-19 have caused many households across the country to redirect their savings to the basic necessities, shelving their big financial goals and decisions, at least, for the time being,” according to MyState Bank general Manager of customer experience, Heather McGovern.

Family savings are largely going towards buying groceries and paying for household bills, the survey found. 

Personal finances in trouble

Financial stress is rife. Half of Australians believe that spending another $200 on their monthly living expenses would be unaffordable.

And nearly 40 per cent of those polled said they did not have an emergency fund set up pre-COVID.

Many Australians have been left financially struggling, despite the range of government and bank-provided hardship support measures, Ms McGovern said.

“While lockdown measures have helped some Australians into a better financial position; for others, it has left gaping holes in their household income,” she said.

Nearly one in five indicated that their household income has dropped by more than a quarter as a result of the pandemic.

“What started out as a health crisis has been felt in the hip pockets of many Australians across the country,” she said.

“With financial support from the government winding back in September, many Australians are likely to feel the pinch even more. As a bank we recognise the need to help our customers stay financially healthy during this time.”

Yet more than 40 per cent of respondents reckon it will take another six to 12 months before finances will recover from the impact of the pandemic.


Big four banks - standard accounts

Bank Product Intro rate Ongoing rate Intro term
CBA NetBank Saver



5 mths
Westpac eSaver



5 mths
NAB iSaver



4 mths
ANZ Online Saver



3 mths

Source: RateCity. Note: Data accurate at time of publishing.

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Learn more about savings accounts

Can you have multiple ING savings accounts?

Yes, you can open up to nine accounts with ING at any particular time. If you’re saving money for various goals, such as buying a car or taking a holiday, you can name each of your multiple ING savings accounts differently.

To get a Savings Maximiser account, you’ll need to deposit more than $1000 every month and make at least five additional purchases. If you also want to grow your savings, from 1st March 2021, you can earn up to 1.35 per cent per annum variable interest on one account with a balance of up to $100,000 when you also maintain an Orange Everyday account.

With ING, multiple savings accounts can help keep track of all your savings goals. All the accounts offer flexible withdrawals where you can withdraw as low or as high as you want without impacting your earning interest rate. However, you can only earn the bonus interest on one account. To apply for a Savings Maximiser account, you can visit

How to make money with a savings account?

Savings accounts make you money by earning interest on your savings. The more money you deposit, the longer you leave it in the account, and the higher the account’s interest rate, the more interest you’ll be paid by the bank or financial institution, and the more your wealth will grow.

To make sure your savings account makes money and doesn’t lose money, it’s important to maintain a large enough minimum balance that the annual interest earned exceeds any annual fees charged on the account.

What are the two types of NAB locked savings accounts?

With a locked savings account in NAB, you can earn bonus interest and learn financial discipline. NAB offers two types of locked savings accounts, each with their own terms and conditions.

The NAB Reward Saver account pays a variable base interest rate of 0.05 per cent per annum and a bonus interest of 0.55 per cent. You’re eligible for the bonus if you make a minimum of one deposit on or before the second last banking day and have no withdrawals in the month.

Meanwhile, the NAB iSaver account provides 0.05 per cent as the standard base interest rate and a fixed bonus margin of 0.55 per cent during the first four months from the date of opening the account. You can park your cash in the account and enjoy unlimited monthly transfers between linked daily bank accounts without impacting the interest rate.

Can you have a joint savings account?

Yes. Joint savings accounts can be useful for two or more people wanting to combine their savings to meet shared financial goals, including spouses, flatmates and business partners.

Some joint savings accounts require all parties to sign before they can access the money. While less convenient, this extra security can help encourage all parties to meet their shared financial goals.

Other joint savings accounts allow any of the account holders to access the money. These accounts can be convenient for financially responsible couples that trust one another implicitly. 

Can you set up a savings account online?

Yes. Several large and small banks offer online applications for savings accounts, and there are also online-only financial institutions to consider.

Online-only savings accounts are often less expensive than other savings accounts, though they may not offer the same flexibility, features, or face-to-face service as more traditional savings accounts.

What is a Westpac locked savings account?

The Westpac locked savings account (also known as "Westpac Life") can help customers reach savings goals faster through bonus interest. Customers receive 0.2 per cent standard base interest with a variable bonus rate of 0.35 per cent when the closing balance at the end of the month is higher than the opening balance.

There are some conditions to earn the bonus interest on Westpac's locked savings account, though. First, you’ll need to increase the balance each month either through a deposit or not making any withdrawals, and then link it to a Westpac Choice account and make at least five eligible payments using your debit card. Please consult your bank as to what an eligible payment is. 

What is an ANZ locked savings account?

An ANZ locked savings account locks your money and prevents you from spending. You may use a standard savings account as the account where your salary is deposited. You can then withdraw funds when needed, but aren’t able to make purchases with it. However, this account may not grow much as the continual withdrawing of funds will limit the interest you can earn.

With a locked savings account in ANZ, you know your savings will grow because you can’t access the money. You can also qualify for a bonus when you deposit at least $10 per month and don’t make any withdrawals. To help you with this further you can set up an automatic transfer from your regular ANZ savings or transaction account so you don’t forget to make a monthly deposit.

Your ANZ locked savings account offers you a base interest rate of 0.1 per cent per annum plus an additional bonus interest of 0.49 per cent per year. The interest is calculated daily and credited to your account on the last working day of the month.

What is the interest rate on savings accounts?

As banks frequently change their rates, the most accurate way to look at interest rates on savings accounts is to use a savings accounts comparison tool. When you look at the savings rate check what the maximum and minimum rates are. Often banks will offer you a promotional rate for the first few months which is competitive, but then revert back to a base rate which can sometimes be less than inflation. Ongoing bonus rates are often a safer bet as they will keep rewarding you with the maximum rate, provided you meet their criteria

How to open a savings account for my child?

Some banks and financial institutions allow parents to open a bank account for their child as soon as it is born, and start depositing funds to go towards the child’s future.

Children’s savings accounts generally don’t have fees, and are structured to help develop positive financial habits by limiting withdrawals, encouraging regular deposits, and earning interest on the savings, similarly to standard savings accounts.

How much money should I have in my savings account?

A good rule of thumb when working out a minimum balance for your savings account is to make sure that you’ll earn more in annual interest on your savings than what you’ll be charged in annual fees.

If you’re saving with a specific goal in mind, prepare a budget so the interest you earn on your deposits will help you efficiently reach this goal. Online financial calculators may be helpful here.

Should I open a Commonwealth locked savings account?

If you have trouble saving money, a Commbank locked savings account could be a potential solution. A locked savings account won’t let you make withdrawals and as such, it can help you grow your savings balance if you keep topping it up. 

The Commonwealth locked savings account advertises high-interest rates and minimal maintenance fees, along with a host of other incentives that will encourage you not to touch the money. 

The account offers a higher interest rate for each month that you make limited or no withdrawals, as well as regular deposits. 

To qualify for a Commonwealth locked savings account with the advertised features, you will need to fulfil specific criteria such as:

  • Depositing a fixed minimum amount into the account every month.
  • Making a fixed number of deposits each month.
  • Making a minimum or no withdrawals each month.
  • Maintaining a minimum account balance.

What is a savings account?

A savings account is a type of bank account in which you earn interest on the money you deposit. This makes it one of the easiest and safest investment tools.

What is a good interest rate for a savings account?

A good rule of thumb to keep in mind with savings accounts is to look for a rate that is higher than the CPI inflation rate. This number is constantly changing, so check the Reserve Bank of Australia’s page. If you aren’t earning interest above this then the value of your money will go backwards over time.

Who has the highest interest rates for savings accounts?

As banks frequently change their rates, the most accurate way to know who currently has the highest interest rate is to use a savings account comparison tool.