The heady pre-GFC days of borrowing exorbitant amounts of money to fund a home purchase while living on credit seem to be a thing of the past, according to new research.
Comparison site RateCity has found there has bee a dramatic shift in the way Australian households and businesses conduct their banking.
The research revealed unprecedented increases in deposits by both households and especially businesses.
“Households added over $190 billion of deposits in the last three years, compared to just over $110 billion for the three years preceding that,” RateCity’s CEO Damian Smith said.
“Again, the story with businesses is even more stark. Businesses added nearly $50 billion in cash deposits in March 2011 vs March 2010, with nearly $120 billion added over the last three years,” he said
The comparison with borrowing is even more stark with Australia now having the slowest increase in overall borrowing for the last seven years.
“Household borrowing grew from $832 billion in August 2005 to $1.3 trillion in August 2011; but the growth in the last 12 months has been just 5 percent or $66 billion, the slowest growth since 2005,” he said.
“The slowdown in business borrowing has been even more pronounced – in fact, we’ve had negative growth over the last 3 years.
“Businesses had $65 billion less of debt in August 2011 compared to August 2008. This not only reflects the fact that many small-to-medium enterprises haven’t been able to get access to credit since the onset of the GFC – it shows that many businesses have been actively reducing debt, either by paying it down or by raising equity,” he said
Borrowing by households and businesses may have turned the corner in recent months. But these changes will impact the economy for years to come, according to Mr Smith.
“But Australians are now more cautious about taking on debt; saving for longer periods before entering the property market and allowing for a financial ‘buffer’,” he said