Post the global financial crisis, the saving rate rose sharply to peak at over 12 per cent in 2009, the highest level since the 1980s. This occurred as households attempted to repair their balance sheets damaged by sharp falls in asset prices.
While consumer confidence remains fragile, 7 years of household balance sheet repair has left households in much better shape. Moreover, there are early signs that risk aversion is abating.
The trajectory for consumer confidence remains important for the consumer spending outlook.
While ongoing soft wage growth will continue to weigh on spending, a moderate pick-up in growth in household consumption, helped by a further gradual fall in the savings rate, looks likely.