tag:theconversation.com,2011:/uk/topics/household-savings-17924/articlesHousehold savings – The Conversation2023-12-25T21:08:15Ztag:theconversation.com,2011:article/2195072023-12-25T21:08:15Z2023-12-25T21:08:15ZHow Boxing Day evolved from giving Christmas leftovers to servants to a retail frenzy<figure><img src="https://images.theconversation.com/files/566753/original/file-20231219-15-pl6vcr.jpg?ixlib=rb-1.1.0&rect=360%2C227%2C5572%2C3987&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/great-big-seasonal-boxing-day-sale-1845136369">Pro-stock Studio/Shutterstock</a></span></figcaption></figure><p>The Boxing Day sales are an essential part of Australia’s festive season.</p>
<p>Every year on December 26 news outlets invariably feature stories about excited shoppers queuing up at the major department stores hoping to score bargains and heavily discounted products. While such reports portray the day’s sales as a time-honoured tradition, they are only a recent ritual.</p>
<p>The <a href="https://www.abc.net.au/news/2020-12-26/history-of-boxing-day-servants-sales-and-saints/12864436">origins of Boxing Day</a> date back to the Middle Ages, when English masters gave their servants a day off after the Christmas celebrations. The servants would be given a box containing leftover food and treats to share with their families. In 1871 the day was formally recognised as a public holiday in the United Kingdom. Australian colonies later followed suit.</p>
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<a href="https://theconversation.com/really-need-those-new-shoes-why-you-might-spend-up-big-at-the-black-friday-sales-218241">Really need those new shoes? Why you might spend up big at the Black Friday sales</a>
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<p>In the 19th and the early 20th centuries, the Boxing Day holiday was largely a day of rest and entertainment. Community sporting events were often held – a tradition that continues in Australia with the Boxing Day Test in Melbourne and the Sydney to Hobart yacht race.</p>
<p>As Boxing Day was an official public holiday, major retailers like department stores were not permitted to trade. These stores only re-opened for business three to five days after Christmas. Retailers certainly advertised “post Christmas bargains”, but most used this period to prepare for the annual stocktake sales that began shortly after New Year’s Day.</p>
<h2>When the day became all about shopping</h2>
<p>A gradual shift occurred during the economic boom after the second world war.</p>
<p>As consumer expenditure increased, the competition between retailers intensified. Eager to get ahead of the pack, Myer was advertising its “<a href="http://nla.gov.au/nla.news-article243434457">pre-stocktaking sale</a>” in 1954. As others began their post-Christmas stocktake sales earlier, they became a key part of the retail annual cycle.</p>
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Read more:
<a href="https://theconversation.com/how-christmas-music-in-adverts-and-shops-harnesses-nostalgia-to-encourage-you-to-spend-more-219277">How Christmas music in adverts and shops harnesses nostalgia to encourage you to spend more</a>
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<p>By the 1980s retail trading hours were coming under pressure. Since the beginning of the 20th century, retail was confined to 9am-6pm on weekdays and 9am-midday on Saturdays. Changing work patterns meant many Australians were only able to do their shopping in a mad rush on Saturday mornings. Over the 1980s and 1990s, trading hours were progressively extended in each state.</p>
<p>The liberalisation of Victoria’s retail trading hours coincided with a further intensification of competition across the department store sector. <a href="https://www.afr.com/politics/confident-daimaru-opens-huge-store-19910910-k4kfb">Daimaru</a>, a Japanese department store, opened a branch in Melbourne in 1991. In its battle to steal market share from Myer and David Jones, Daimaru pioneered new initiatives, including 24-hour trading in the lead up to Christmas and trading on Boxing Day.</p>
<p>To promote its Boxing Day sale and generate a real buzz, Daimaru advertised a small number of enormously discounted products. These door buster sales worked. Crowds queued in the early hours of the morning to snare one of the bargains. As the doors opened, mayhem ensued as frenzied shoppers literally burst into the store.</p>
<h2>The pursuit of a bargain got a little too serious</h2>
<p>The appeal of the door buster sale took a hit in 1993 when one eager shopper lost the tips of her fingers in the store’s roller doors. Fearing further carnage, extreme discounts were subsequently dropped, but the crowds hoping to catch a bargain remained. By 2000, Boxing Day sales had become a firmly entrenched tradition.</p>
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<span class="caption">The door buster sales stopped soon after one keen shopper was injured in the rush.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/mad-shoppers-breaking-into-shop-during-2369347377">DC Studio/Shutterstock</a></span>
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<p>Although the novelty had faded, Boxing Day sales nevertheless remained an exciting event. Television news crews continued to capture the excitement when the <a href="https://www.youtube.com/watch?v=PIK8dEA1pWc">stores opened</a> while newspapers reported on the size of crowds and what this revealed about the state of retail and the economy more generally. </p>
<p>By 2018, a discernible shift was occurring. <a href="https://www.theage.com.au/business/consumer-affairs/there-at-3am-bargain-hunters-up-before-dawn-for-boxing-day-sales-20181226-p50o8d.html">Fewer people were queuing up</a> and stores were opening later. The major department stores were no longer the dominant retailers they had once been. A broader range of brands and cheaper products could be found elsewhere, notably online, where bargains could be secured without the frustrations of dealing with other frantic shoppers.</p>
<h2>The arrival of online shopping</h2>
<p>Online shopping changed Australian shopping patterns as bargain hunters could now access overseas sales like Black Friday in the United States. Staged on the day after Thanksgiving, Black Friday is American retail’s busiest day that also kicks off the Christmas shopping season. Sales abound as retailers desperately chase shoppers. </p>
<p>Online has become an integral part of these sales, with Black Friday being extended to Cyber Monday. Australians shopping online have readily joined in.</p>
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Read more:
<a href="https://theconversation.com/an-austere-christmas-is-on-the-cards-but-dont-say-recession-218718">An austere Christmas is on the cards – but don't say recession</a>
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<p>In 2022 Australians <a href="https://news.nab.com.au/news/black-friday-and-cyber-monday-sales-top-7-billion/">spent an estimated A$7.1 billion</a> over the Black Friday sales period. While this figure is eclipsed by the $23.5 billion predicted for Boxing Day sales period, the reality is the gap is shrinking fast.</p>
<p>This year, it is predicted Australian expenditure on Black Friday will exceed that for Boxing Day.</p>
<h2>Will Black Friday overtake Boxing Day?</h2>
<p>So, are Boxing Day sales doomed to become another lost tradition? Large discounts and the convenience of shopping online have certainly helped Black Friday’s rapid growth. However, its real advantage is timing. Shoppers not only use these sales for themselves, they can do their Christmas shopping at the same time. Such a combination means Black Friday has quickly become a fixture in Australian retailing.</p>
<p>Of course, Boxing Day sales are not dead. Wherever there are bargains to be had, there will always be shoppers ready to buy. Rather than competing with Black Friday, it seems that the challenge for Australian retailers is to reinvent the Boxing Day sales tradition.</p>
<p>Maybe it’s time to bring back the door buster bargains.</p><img src="https://counter.theconversation.com/content/219507/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Robert Crawford receives funding from the Australian Research Council’s Discovery Project scheme (DP220100943) </span></em></p>Boxing Day has its origins in the Middle Ages and had nothing to do with post-Christmas sales. It is facing further change with the popularity of online shopping.Robert Crawford, Professor of Advertising, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2112612023-08-20T20:04:13Z2023-08-20T20:04:13Z5 tips for getting off gas at home – for a cleaner, cheaper, healthier all-electric future<figure><img src="https://images.theconversation.com/files/543177/original/file-20230817-23-84peqv.jpg?ixlib=rb-1.1.0&rect=124%2C7%2C5052%2C3437&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/induction-cooking-home-on-black-portable-1477848773">Elena M. Tarasova, Shutterstock</a></span></figcaption></figure><p>Burning gas in our homes to cook food or heat air and water has become a contentious issue. Gas is an expensive, polluting fossil fuel, and there’s mounting evidence to suggest it’s also <a href="https://www1.racgp.org.au/ajgp/2022/december/health-risks-from-indoor-gas-appliances">bad for our health</a>. </p>
<p>Five million existing Australian households will need to <a href="https://grattan.edu.au/report/getting-off-gas/">get off gas</a> within the next 30 years. But for homeowners, the upfront cost can be a major barrier to action. Renters rarely get a say over the appliances installed in their homes. And apartment owners can struggle to make individual changes too. </p>
<p>In most cases it’s worth making the switch, for the energy bill savings alone. For example, analysis suggests a household in Melbourne switching from gas to electricity can save <a href="https://theconversation.com/all-electric-homes-are-better-for-your-hip-pocket-and-the-planet-heres-how-governments-can-help-us-get-off-gas-207409">up to A$13,900</a> over a decade.</p>
<p>If you’re contemplating upgrading gas appliances in your home, or even disconnecting from the gas network altogether, here are a few handy tips and resources to cut through the confusion. </p>
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<figcaption><span class="caption">Homes must switch away from gas by 2050, says policy think tank (ABC News)</span></figcaption>
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<a href="https://theconversation.com/keen-to-get-off-gas-in-your-home-but-struggling-to-make-the-switch-research-shows-youre-not-alone-209589">Keen to get off gas in your home, but struggling to make the switch? Research shows you're not alone</a>
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<h2>Tip 1 – Find trusted, independent information</h2>
<p>There is no shortage of information on how to make the switch from gas to all-electric appliances. The challenge is finding <a href="https://theconversation.com/we-need-a-lemon-law-to-make-all-the-homes-we-buy-and-rent-more-energy-efficient-204369">trusted and independent information</a>. </p>
<p>Not-for-profit organisation <a href="https://renew.org.au/">Renew</a> has compiled a range of <a href="https://renew.org.au/resources/how-we-can-help/efficient-electric-homes/how-we-can-help-going-off-gas/">presentations, guides, case studies and research</a>. <a href="https://www.choice.com.au/">Choice</a> provides independent reviews of household appliances, including operating costs. The Australian government’s <a href="https://www.energyrating.gov.au/">Energy Rating website</a> provides information on appliances to help consumers compare performance. Some <a href="https://www.yarracity.vic.gov.au/services/take-climate-action">local councils</a> and <a href="https://totallyrenewableyack.org.au/">community groups</a> also provide information, support and bulk-buying schemes.</p>
<p>You could also visit some of the all-electric homes open to the public for <a href="https://sustainablehouseday.com/">Sustainable House Day</a>. This can help you learn what works from people who have already made the change. </p>
<p>The <a href="https://www.facebook.com/groups/MyEfficientElectricHome">My Efficient Electric Home</a> group on Facebook is another active and helpful forum. </p>
<p>If you are going all-electric as part of a wider retrofit, consider an independent <a href="https://www.homescorecard.gov.au/">Residential Efficiency Scorecard assessment</a>. This will help you understand what to else you can do to maximise <a href="https://theconversation.com/the-other-99-retrofitting-is-the-key-to-putting-more-australians-into-eco-homes-91231">thermal comfort, environmental benefits and financial outcomes</a>.</p>
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<h2>Tip 2 – Plan your approach</h2>
<p>Once you understand what to do, the next step is planning how to go about it. Think about what is most important to your household. What is driving the change? If it’s your health, you might like to start by eliminating indoor air pollution from the gas stove. Or if you want to save money, start using reverse-cycle air conditioning to heat your home, rather than gas.</p>
<p>There are three main ways to go all-electric: </p>
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<li><p><strong>Replace all your gas appliances at once</strong>. Making the change quickly minimises disruption to your home. You may save money on installation costs by doing everything in one go. You will avoid ongoing fixed gas supply charges once you disconnect from the gas network, but you may be required to pay an “<a href="https://energy.act.gov.au/switching-off-your-gas-connection/">abolishment fee</a>” for permanent disconnection. That fee can vary significantly, depending on your location and gas provider. Costs <a href="https://www.smh.com.au/environment/sustainability/would-you-pay-1000-to-get-off-gas-consumer-dismay-over-disconnection-cost-20230223-p5cmw9.html">could be up to $1000 (or more)</a> but some states like Victoria have capped the price a <a href="https://reneweconomy.com.au/fossil-gas-death-spiral-regulator-sets-exit-fee-to-socialise-cost-of-mass-disconnection/">household can be charged at $220</a>. Renters wouldn’t be able to permanently disconnect without permission from the landlord, so they would still be open to paying the daily connection fee even if they found alternative electric options for everything else. </p></li>
<li><p><strong>Replace your gas appliances one at a time</strong>, as finances allow. However, there will come a point where <a href="http://www.ata.org.au/wp-content/projects/CAP_Gas_Research_Final_Report_251114_v2.0.pdf">financially you will be better off</a> replacing all the remaining gas appliances. This is largely because it will not be affordable to keep paying the daily connection cost for gas if you just have one gas appliance remaining. </p></li>
<li><p><strong>Just stop using gas appliances</strong> in favour of existing electric appliances that do the same job, such as a <a href="https://reneweconomy.com.au/the-traps-laid-by-the-fossil-gas-industry-for-uninformed-households/">reverse cycle air conditioner for space heating</a>. You may have – or can buy – plug-in electric alternatives, such as a microwave ovens, portable induction cooktops, air fryers and heaters. These can be a good option for renters when landlords won’t make changes.</p></li>
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Read more:
<a href="https://theconversation.com/cooking-and-heating-without-gas-what-are-the-impacts-of-shifting-to-all-electric-homes-210649">Cooking (and heating) without gas: what are the impacts of shifting to all-electric homes?</a>
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<p>You could even borrow portable appliances to see how they work before committing to buying your own. </p>
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<figcaption><span class="caption">Households share their electrification journey (Renew)</span></figcaption>
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<h2>Tip 3 – Access available rebates and resources</h2>
<p>Most states offer various rebates for households to reduce the upfront cost of replacing gas appliances. These could reduce costs by thousands of dollars. Some rebates also target rental housing. Here is a list of key rebates available in different states:</p>
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<li><a href="https://www.epw.qld.gov.au/about/initiatives/household-energy-savings-program">Queensland</a></li>
<li><a href="https://www.energy.nsw.gov.au/households/rebates-grants-and-schemes">New South Wales</a></li>
<li><a href="https://www.climatechoices.act.gov.au/policy-programs/home-energy-support-rebates-for-homeowners">ACT</a></li>
<li><a href="https://www.energy.vic.gov.au/for-households/victorian-energy-upgrades-for-households">Victoria</a></li>
<li><a href="https://recfit.tas.gov.au/household_energy/energy_saver_loan_scheme">Tasmania</a></li>
<li><a href="https://www.sa.gov.au/topics/energy-and-environment/using-saving-energy/retailer-energy-productivity-scheme">South Australia</a></li>
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<p>Some not-for-profit organisations (such as the <a href="https://www.bsl.org.au/services/energy-assistance/">Brotherhood of St Laurence</a>) offer financial and other support for lower-income households struggling to pay their energy bills.</p>
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Read more:
<a href="https://theconversation.com/want-an-easy-400-a-year-ditch-the-gas-heater-in-your-home-for-an-electric-split-system-201941">Want an easy $400 a year? Ditch the gas heater in your home for an electric split system</a>
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<h2>Tip 4 – Wait for a sale or negotiate a better deal</h2>
<p>It might sound simple but you can always save money by waiting until these electric appliances are on sale. If you are buying multiple appliances you can try to negotiate a better price. Factory seconds outlets offer lower prices as well.</p>
<h2>Tip 5 – Know the issues</h2>
<p>While the shift to all-electric will likely provide many benefits there are some things you need to consider:</p>
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<li>The carbon emissions from electricity are falling fast, and many homes have rooftop solar. Combining <a href="https://grattan.edu.au/report/getting-off-gas/">all-electric with solar panels</a> will maximise returns. </li>
<li>You may have to adjust to how new technologies operate and perform. For example, you may need <a href="https://www.theage.com.au/goodfood/tips-and-advice/do-you-really-have-to-buy-new-cookware-all-your-burning-questions-about-induction-cooking-answered-20230810-p5dvd0.html">new, metallic cookware for an induction cooktop</a> and become familiar with their fast response. Additionally, some people find heat from reverse cycle air conditioners to be drier and/or draughtier than gas heating. Floor-mounted units heat more effectively. </li>
<li>It is not just the energy performance of appliances that matters. For example, noise from heat pump hot water services can vary across different brands. They can also require more space for installation.</li>
<li>Undertaking a wider energy retrofit (for example, increasing insulation in walls, ceiling and underfloor, upgrading windows to double glazing) may mean you can buy a smaller, cheaper reverse cycle air conditioner when replacing gas heating.</li>
<li>Electric appliances also need maintenance to make sure they perform optimally. For example, reverse cycle air conditioners have filters that must be regularly cleaned. While this can be done by households, it can be hard for people with mobility issues.</li>
<li>Depending on the capacity of your electricity switchboard or wiring, extra electric appliances may require upgrades.</li>
<li>For renters, while you could use portable appliances, you may not be able to disconnect from gas completely, meaning you would still have to pay a daily connection fee.</li>
<li>Gas and electricity prices can change over time, for many reasons. For example, if fixed gas distribution costs are spread over fewer customers.</li>
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<h2>A worthwhile investment</h2>
<p>Australian states and territories have started banning gas in new builds. Victoria and the ACT will soon require <a href="https://theconversation.com/cooking-and-heating-without-gas-what-are-the-impacts-of-shifting-to-all-electric-homes-210649">new housing and major renovations to be all-electric</a>. Others are likely to follow. </p>
<p>For people in existing housing around Australia, it can be daunting to make the switch. Many of us have grown up with gas in our homes and when one appliance breaks, the easiest thing to do is replace like-for-like. But the weight of evidence shows it’s worth taking the time to look at the alteratives and invest in upgrading to all-electric appliances. The benefits far outweigh the costs. </p>
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Read more:
<a href="https://theconversation.com/all-electric-homes-are-better-for-your-hip-pocket-and-the-planet-heres-how-governments-can-help-us-get-off-gas-207409">All-electric homes are better for your hip pocket and the planet. Here's how governments can help us get off gas</a>
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<p class="fine-print"><em><span>Trivess Moore has received funding from various organisations including the Australian Research Council, Australian Housing and Urban Research Institute, Victorian Government and various industry partners. He is a trustee of the Fuel Poverty Research Network.</span></em></p><p class="fine-print"><em><span>Alan Pears consults to and advises a number of not-for-profit organisations involved in transition from gas issues such as the Australian Alliance for Energy Productivity, Energy Efficiency Council, Renew. He has received funding from A2EP, EEC and Energy Consumers Australia for work in this area. He writes a regular column for Renew magazine, and for other websites such as Reneweconomy and thefifthestate. </span></em></p><p class="fine-print"><em><span>Nicola Willand receives or has received funding for research from various organisations, including the Australian Research Council, the Victorian State Government, the Lord Mayor’s Charitable Foundation, the Australian Housing and Urban Research Institute, the Future Fuels Collaborative Research Centre, the Australian National Health and Medical Research Centre and the British Academy. She is affiliated with the Australian Institute of Architects.</span></em></p>Thinking about getting your home off gas, but don’t know where to begin? Here’s a few handy tips to get you on your way.Trivess Moore, Senior Lecturer, School of Property, Construction and Project Management, RMIT UniversityAlan Pears, Senior Industry Fellow, RMIT UniversityNicola Willand, Senior Lecturer, School of Property, Construction and Project Management, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1963332022-12-20T13:38:15Z2022-12-20T13:38:15ZAmericans’ personal savings rate is near an all-time low – an economist explains what it means as a potential recession looms<figure><img src="https://images.theconversation.com/files/501599/original/file-20221216-16-p6e47a.jpg?ixlib=rb-1.1.0&rect=206%2C197%2C5784%2C3790&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Is Americans' low savings rate a problem?</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/midsection-of-woman-putting-coin-in-piggy-bank-on-royalty-free-image/1092378808?phrase=piggy%20bank">Maneerat/EyeEm via Getty Images</a></span></figcaption></figure><p><em>The rate at which Americans are saving money <a href="https://fred.stlouisfed.org/series/PSAVERT">has dipped close to an all-time low</a>, according to the Bureau of Economic Analysis. The personal savings rate was 2.3% as of October, down from 7.3% a year earlier. It’s the lowest since July 2005, when the rate hit a record low of 2.1%.</em></p>
<p><em>We asked <a href="https://scholar.google.com/citations?user=0ujPNgoAAAAJ&hl=en&oi=ao">Arabinda Basistha</a>, an economist at West Virginia University, to explain the personal savings rate, what’s driving it so low and what it means as a potential recession looms in 2023.</em></p>
<h2>What is the personal savings rate?</h2>
<p>The personal savings rate measures how much of Americans’ after-tax, or disposable, income is left over after spending on bills, food, debt and everything else. Calculated and reported by <a href="https://www.bea.gov/resources/learning-center/what-to-know-income-saving">the U.S. Bureau of Economic Analysis</a>, it is an important component of the financial security of American families. </p>
<p>The latest data shows Americans are saving just 2.3%, or US$2.30 of every $100 they earn after paying taxes, down from 7.5% as recently as December 2021. Historically, that’s very low.</p>
<p>From 2015 to 2019, for example, <a href="https://fred.stlouisfed.org/series/PSAVERT">this rate averaged around 7.6%</a>. It rose dramatically during the COVID-19 shutdown in early 2020, to a record high of 33.8%. With restaurants, entertainment venues and almost <a href="https://www.ajmc.com/view/a-timeline-of-covid19-developments-in-2020">everything else closed</a>, Americans had fewer things to spend money on.</p>
<p>That’s changed as economies have opened up and people eager to travel and dine out have begun to spend the money they had saved. </p>
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<h2>Will the savings rate decline continue?</h2>
<p>American consumers usually <a href="https://research.stlouisfed.org/publications/page1-econ/2014/11/01/smoothing-the-path-balancing-debt-income-and-saving-for-the-future/?&utm_source=fred.stlouisfed.org&utm_medium=referral&utm_term=related_resources&utm_content=&utm_campaign=pageone">do not change</a> their consumption and saving behavior dramatically. </p>
<p>So to understand this decline, it’s important to add some historical context.</p>
<p>The last time the savings rate fell this low, in 2005, it was part of a trend that lasted several years. From 1998 to 2004, rates averaged about 5.4%, slipping to 3.3% from 2005 to 2007. Thus the 2.1% rate recorded in July 2005 should be seen as part of a low-savings rate phase. </p>
<p>In recent years, Americans have been saving more of their disposable income. The savings rate averaged nearly 9% in 2019 just before the pandemic stifled spending. This led to the massive swing upward in savings.</p>
<p>An <a href="https://www.federalreserve.gov/econres/notes/feds-notes/excess-savings-during-the-covid-19-pandemic-20221021.html">October 2022 study</a> by the Federal Reserve found that U.S. households accumulated $2.3 trillion during the pandemic, thanks in part to about <a href="https://www.bloomberg.com/news/articles/2022-11-11/stimulus-checks-left-americans-flush-with-cash-making-fed-s-job-harder?sref=Hjm5biAW">$1.5 trillion in direct fiscal support</a>. </p>
<p>Rates swung again in the other direction, as consumer spending has surged and people use up those excess savings. Against this backdrop, I believe it is quite unlikely that the current low rates will continue for long, as consumers adjust back to pre-2020 patterns.</p>
<h2>What does the drop in savings signal about the state of Americans’ finances?</h2>
<p>While the savings rate is important, it doesn’t give us the full picture of Americans’ financial health. Moreover, one should not put too much importance on a single set of recent data, as future revisions <a href="https://fredblog.stlouisfed.org/2014/05/the-vanishing-negative-savings-rate/?utm_source=series_page&utm_medium=related_content&utm_term=related_resources&utm_campaign=fredblog">can be large</a>. </p>
<p>A few other measures are necessary to assess the state of household finances.</p>
<p>First, current delinquency rates – the share of all loans that are past due for at least 30 days – <a href="https://fred.stlouisfed.org/series/DRALACBN">are at just 1.2%</a>, the lowest since at least the 1980s. The <a href="https://fred.stlouisfed.org/series/DRCLACBS">rate is 1.9%</a> for consumer loans and <a href="https://fred.stlouisfed.org/series/DRCCLACBS">2.1% for credit cards</a>. Both rates have increased since 2021 but are still historically low.</p>
<p><iframe id="fE55O" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/fE55O/2/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>The low rates <a href="https://www.federalreserve.gov/econres/notes/feds-notes/why-is-the-default-rate-so-low-20210304.html">are partly due</a> to the <a href="https://libertystreeteconomics.newyorkfed.org/2020/11/following-borrowers-through-forbearance/">pandemic forbearance programs</a> and fiscal support, but still show Americans are in pretty good shape financially.</p>
<p>Another metric worth looking at is the household debt to gross domestic product ratio. This measures the debt burden of U.S. households relative to the size of the economy. The <a href="https://fred.stlouisfed.org/series/HDTGPDUSQ163N">latest data from June 2022 shows</a> the ratio at 76%, which is near the <a href="https://tradingeconomics.com/united-states/households-debt-to-gdp">lowest in about two decades</a>. Ahead of the 2007-2009 recession, the ratio was significantly higher, at about 100%. </p>
<p>A third measure of Americans’ financial health is the share of disposable income spent on payments for mortgages and other debts. U.S. households <a href="https://fred.stlouisfed.org/series/TDSP">spent about 9.6% of their incomes</a> servicing debts in the second quarter of 2022, well below the 12.8% average from 2005 to 2007. </p>
<h2>So if there’s a recession in 2023, does this mean Americans will be ready for it?</h2>
<p>Adding all this information together, household finances look quite stable and able to withstand moderate economic risks to the U.S. economy. </p>
<p>This is not to argue that a persistently low savings rate will not be an issue in the future. If the savings rate remains low for another year, it will weaken household financial positions.</p><img src="https://counter.theconversation.com/content/196333/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Arabinda Basistha does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Americans are saving just over $2 of every $100 in disposable income after setting aside historically high amounts of cash during the pandemic.Arabinda Basistha, Associate Professor of Economics, West Virginia UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1454842020-09-03T20:00:23Z2020-09-03T20:00:23ZVital Signs: How do you fight a recession without precedent?<p>It became official on Wednesday. The Australian economy is in recession for the first time in nearly three decades.</p>
<p>And the drop in economic activity is unprecedented. GDP fell 7% in the June quarter. The previous biggest post-war fall in Australia was 2% in June 1974.</p>
<p>But Treasurer Josh Frydenberg noted that in March he was told the June quarter contraction might be 20%. In Britain it was.</p>
<p>Bookkeeping aside, the question that matters is how to fight this recession. </p>
<p>Answering it requires an understanding that it is a different type of recession to those we’ve seen before.</p>
<p>As I pointed out <a href="https://theconversation.com/vital-signs-covid-19-recession-is-different-and-we-need-more-stimulus-to-deal-with-it-141037">earlier this year</a> the recessions some of us grew up with in the early 1980s and 1990s were “business cycle” recessions. </p>
<p>They happened because the economy overtook its inbuilt speed limit and pushed up inflation. To curb it, central banks pushed up interest rates, pushed them up too far and choked off investment and spending, sending economic activity backwards.</p>
<h2>A recession like no other</h2>
<p>In 2020 we face a different sort of shock. </p>
<p>COVID-19 has hammered economic activity, even more so in countries such as the United States where it has run out of control.</p>
<p>Many of the opportunities we used to have to spend money (such as airlines, theatre tickets and cafe meals) simply haven’t been there.</p>
<p>They’ll come back when things return to closer to normal, perhaps though the wide deployment of a vaccine.</p>
<p>But we might not spend as we used to.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/six-graphs-that-explain-australias-recession-145445">Six graphs that explain Australia's recession</a>
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<p>Some people, out of work or on shorter hours won’t have the capacity to spend. Others will want to rebuild their savings.</p>
<p>And others who have been saving big might decide to keep doing it.</p>
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<p><strong>Household saving ratio</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/355997/original/file-20200902-22-yq9rjf.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/355997/original/file-20200902-22-yq9rjf.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/355997/original/file-20200902-22-yq9rjf.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=307&fit=crop&dpr=1 600w, https://images.theconversation.com/files/355997/original/file-20200902-22-yq9rjf.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=307&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/355997/original/file-20200902-22-yq9rjf.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=307&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/355997/original/file-20200902-22-yq9rjf.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=386&fit=crop&dpr=1 754w, https://images.theconversation.com/files/355997/original/file-20200902-22-yq9rjf.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=386&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/355997/original/file-20200902-22-yq9rjf.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=386&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="attribution"><span class="source">ABS Australian National Accounts</span></span>
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<p>Australia’s household saving ratio surged to 19.7% in the June quarter. </p>
<p>It’s a peak not reached since 1974 at a time when there was much less of an age pension and superannuation, no Medicare and surging unemployment. In other words, its at a height not reached since people really needed to save.</p>
<p>The Bureau of Statistics says that if household income from all sources including early access to super was counted, the ratio is even higher. Its estimate of what it calls the “household experience savings ratio” is 24.8%.</p>
<p>That means households saved an extraordinary one in every four dollars that came through their doors in the June quarter, up from mere percentage points a few quarters earlier.</p>
<p>Much of it would have been what economists call <a href="https://academic.oup.com/qje/article/132/3/1427/3071924?casa_token=NaR4tX3aSioAAAAA:5a0tN7y4nXtjvyxhO1tit2wcRHuU-NmyYeUJD2Md_gw6wnoLrLkYAwfNWxBE4XkYCfTVh4NeLIfL4rQ">precautionary saving</a>, understandable given how much of the future is uncertain.</p>
<h2>There’s such a thing as too much saving</h2>
<p>But what if this extraordinarily high saving rate lasts beyond the point it is understandable, as it did in Japan.</p>
<p>As with Japan in the 1990s when saving soared, real interest rates are negative. We are so <a href="https://web.mit.edu/krugman/www/japtrap.html">keen to save</a> we don’t need a financial return.</p>
<p>There were signs of it worldwide, well before the pandemic. President’s Clinton’s Treasury Secretary Larry Summers referred to it as <a href="http://larrysummers.com/2016/02/17/the-age-of-secular-stagnation/">secular stagnation</a>, a term first coined in the 1930s.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/have-we-just-stumbled-on-the-biggest-productivity-increase-of-the-century-145104">Have we just stumbled on the biggest productivity increase of the century?</a>
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<p>Saving more than we are prepared to invest shrinks economic activity. It creates unemployment which itself creates uncertainly, prodding people to save still more than they invest.</p>
<p>It’s one of the reasons worldwide economic growth is low, interest rates are low, and inflation is low.</p>
<p>During the pandemic the government is spending more than A$100 billion on measures such as JobKeeper and JobSeeker.</p>
<h2>If we won’t spend, out government will have to</h2>
<p>Post pandemic it might have to keep spending big on physical and social infrastructure – things such as major projects and better aged care and health care.</p>
<p>If we won’t spend big again, it’ll have to. It’ll need to get the economy’s long term growth rate back up to 2%, or even the <a href="https://treasury.gov.au/speech/the-macroeconomic-context">near 3%</a> the Treasury thinks it is capable of.</p>
<p>It’ll require a lot. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/when-it-comes-to-economic-reform-the-old-days-really-were-better-we-checked-145296">When it comes to economic reform, the old days really were better. We checked</a>
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<p>Australia used to have one of the lowest company tax rates in the developed world, now we have one of the highest. We tax labour income too much and consumption too little. And we have a hopelessly out of date and absurdly complex industrial relations system. </p>
<p>Each of those things are a handbrake on economic growth.</p>
<p>This is an unusual recession and an unusually deep one. </p>
<p>Digging our way out will require us to at first contain and defeat the virus, and then spend like Keynes and <a href="https://www.afr.com/policy/economy/we-can-spend-like-keynes-and-cut-taxes-like-friedman-20200728-p55g2s">cut taxes like Friedman</a>.</p><img src="https://counter.theconversation.com/content/145484/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Holden does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Most recessions are caused by an overreaction to too much inflation. This one is because we are not spending.Richard Holden, Professor of Economics, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/832292017-10-19T03:51:42Z2017-10-19T03:51:42ZLet Google bill you for all your electricity, gas, phone and every other utility<p><a href="http://www.abc.net.au/news/2017-10-16/clean-energy-target-not-certain-to-lower-power-prices-accc/9052094">Soaring electricity prices</a> in Australia are putting pressure on people <a href="http://www.news.com.au/national/politics/accc-boss-rod-sims-delivers-dire-warning-over-soaring-power-prices/news-story/8a226c3aeca82a7131d559676d779c4a">to make some tough decisions</a> and seek <a href="https://www.choice.com.au/shopping/shopping-for-services/utilities/articles/shopping-around-for-a-new-energy-deal">cheaper deals</a>.</p>
<p>The idea of saving money by <a href="http://www.news.com.au/finance/money/costs/how-to-curb-energy-costs-by-rolling-all-your-utility-bills-into-one/news-story/a01d6235cf82af772ee9c75419539d81">bundling electricity and gas from the same retailer</a> has been around for some time. Some companies can even add telephone and internet services to your bill.</p>
<p>But what if Google or Apple or one of the other tech giants was the sole retailer for all the utility services to your home?</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/australian-household-electricity-prices-may-be-25-higher-than-official-reports-84681">Australian household electricity prices may be 25% higher than official reports</a>
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<p>Here’s what this might look like. </p>
<h2>The multi-utility retailer</h2>
<p>Utility retailers don’t need to own the generation (power plant for electricity) or distribution (copper and cable for phone and internet) assets.</p>
<p>Their role is simply to buy utility resources from asset owners, and then sell them to a customer at an agreed price.</p>
<p>So imagine if you could bundle in several utilities from the one multi-utility retailer.</p>
<p>Tech giants Google, Apple, Facebook and Amazon have shown how they can exploit valuable business opportunities by having a direct relationship with their customers.</p>
<p>With access to information from their online searches, purchases, social media likes and shares, they can suggest other services based on their previous behaviour.</p>
<p>So what if a multi-utility retailer could collect data from all of a customer’s utilities and use that to get a better deal from providers?</p>
<p>This concept is not too far away. Digital metering, advanced communications and big data analytics pave the way for the creation of a global multi-utility retailer.</p>
<h2>Who gets to benefit?</h2>
<p>A company that could integrate such technologies would be able access mass markets not bounded by the typical city, state or country limits of traditional utility providers. It could service millions, if not billions, of customers.</p>
<p>The primary benefit to a multi-utility retailer is access to big data from customers. This would allow them to create innovative tariff structures and offer conservation products and rebates.</p>
<p>Other benefits include:</p>
<ul>
<li><p>using customer demand data analytics to optimise utility grids</p></li>
<li><p>reducing peak demand and thus prices through timely feedback of data and/or appliance control</p></li>
<li><p>offering a range of new services such as more efficient devices and equipment such as solar cells, battery storage, rainwater tanks, etc.</p></li>
</ul>
<h2>What about the customers?</h2>
<p>Customers would have access to all their utility billing and usage information in one place, through a single web portal or phone app.</p>
<p>With near real-time access to all of their data, they would feel they had far greater control over their combined household bills.</p>
<p>They would get detailed reports on when (time of day, day, month, seasons, etc.) and where they used a particular utility resource.</p>
<p>They would then be able to monitor their consumption against budgets, and take advantage of any conservation products and rebates.</p>
<p>The overall aim would be that customers should benefit from lower utility bills.</p>
<h2>What are the challenges?</h2>
<p>While feasible, several challenges would slow the introduction of a multi-utility retailer.</p>
<p>The foremost is the traditional natural monopoly arrangement of the utility sector. This is often government-owned (for example, Sydney Water, Energex), extensively regulated and mostly protected from private sector competition.</p>
<p>But given that utility retail functions mainly involve only the monitoring and billing of demand, this is relatively easy to open to private companies.</p>
<p>Governments undoubtedly hold the keys to unlocking the potential of multi-utility retailer business models. This would force traditional utility operators to negotiate with retailers on alternative wholesale pricing models.</p>
<p>Governments would also need to introduce some monopoly safeguards, to make sure no single multi-utility provider stifled any competition.</p>
<h2>Too much information</h2>
<p>Beyond these regulatory challenges, there are a number of other barriers to the entry of a multi-utility retailer. Privacy is understandably a major community concern for people in the digital age. </p>
<p>Digital metering captures extensive demand information on customers. </p>
<p>Customers would need to feel confident that any multi-utility retailer had sufficient ethical and cyber security obligations to be a trustworthy custodian of their data. There is already some <a href="https://theconversation.com/ten-questions-you-should-ask-before-sharing-data-about-your-customers-84845">good advice</a> available on this issue.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/ten-questions-you-should-ask-before-sharing-data-about-your-customers-84845">Ten questions you should ask before sharing data about your customers</a>
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<p>Digital metering technology and information systems are becoming affordable and reliable to implement. But a number of technical challenges still detract from their widespread implementation, such as the reliability of any communications network.</p>
<p>While these and other challenges are significant, they are not insurmountable.</p>
<p>They can be overcome with appropriate government championing and regulation, targeted research and development, pilot trials, robust software engineering and passionate business entrepreneurship.</p>
<p>So don’t be surprised in the next decade if Google, Amazon or some new technology behemoth sends you an offer to take advantage of their new multi-utility service.</p><img src="https://counter.theconversation.com/content/83229/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Rodney Stewart does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>One way to cut your household bills could be to deal with just one company for all your utility needs. With today’s technology, it’s an idea that’s not so far fetched as it sounds.Rodney Stewart, Professor, Griffith School of Engineering, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/795982017-06-22T09:53:13Z2017-06-22T09:53:13ZSix graphs showing the state of the UK economy a year after Brexit referendum<figure><img src="https://images.theconversation.com/files/174924/original/file-20170621-4662-1uzsrcw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">What's happened a year on?</span> <span class="attribution"><span class="source">via shutterstock.com</span></span></figcaption></figure><p>It has been a year since British voters went to the polls and <a href="https://theconversation.com/brexit-is-on-britain-votes-to-leave-the-eu-experts-respond-61576?sr=1">voted</a> by a narrow margin to leave the European Union. The Brexit referendum triggered a heated debate about the potential economic effects of Brexit. But what has actually happened to the UK economy in the year since the Brexit vote? These six graphs help explain. </p>
<h2>GDP growth</h2>
<p>Overall, the UK economy performed relatively well in terms of GDP growth during the second half of 2016 following the referendum. However, more recently there have been <a href="http://www.oecd.org/economy/g20-gdp-growth-first-quarter-2017-oecd.htm">indications</a> of a slowdown in economic activity in the UK.</p>
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<h2>The pound</h2>
<p>The British currency was one of the economic variables that was <a href="https://theconversation.com/brexit-shock-has-caused-a-sterling-crash-of-historic-proportions-heres-just-how-bad-it-is-for-the-pound-62191?sr=1">most affected</a> by the decision of the British electorate to leave the EU. Sterling has depreciated by a significant amount, around 15%, since last year as international markets reacted to the announcement of Brexit. A standard explanation is that markets expect lower volumes for future UK-EU international trade and also that longer term projections for future UK growth could be revised downwards.</p>
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<h2>Inflation</h2>
<p>The depreciation of the pound has contributed to a significant rise in the price of imports into the UK. British consumers are now having to pay a much higher price for foreign products. As a result, inflation increased from 0.5% in June 2016 to 1% in September and 2.9% in May 2017, the highest in four years. This is likely to affect both businesses that import products, and consumers. </p>
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<p>The rise in inflation also raises challenging questions for members of the Bank of England’s Monetary Policy Committee (MPC), which sets UK interest rates, and has a <a href="http://www.bankofengland.co.uk/monetarypolicy/Pages/framework/framework.aspx">target</a> to keep inflation below 2%. The MPC could tighten monetary policy by raising interest rates in order to reduce inflation, but this will probably hurt households and potentially GDP growth. Alternatively, it could decide to ignore inflation for the moment and lower interest rates even further. Or do nothing. In June 2017, members of the MPC remained <a href="http://www.bbc.co.uk/news/business-40354879">divided</a> over whether it is the right time to raise interest rates. </p>
<h2>Average earnings</h2>
<p>In the labour market, the most notable change has been a drop in real weekly earnings since the end of 2016. Average weekly wages (excluding bonuses) fell from £461 in June 2016 to £459 in December 2016 and £458 in April 2017. This is the result of weak nominal wage growth (closely related to the UK’s <a href="http://www.bankofengland.co.uk/publications/Documents/speeches/2017/speech968.pdf">productivity puzzle</a>), combined with the steady rise of inflation. Real wages have fallen in the UK and people are beginning to feel the pinch.</p>
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<h2>Household savings</h2>
<p>The drop in average earnings could have serious consequences for future UK GDP growth. This is both because household savings have steadily depleted in recent years, and recent UK GDP growth was <a href="https://www.ons.gov.uk/economy/grossdomesticproductgdp/bulletins/secondestimateofgdp/quarter1jantomar2017">driven by consumer spending</a>. If consumers have less in their pay packet each month, the economy could slow further. </p>
<p>The households savings ratio attempts to present a picture of how much money households save as part of their income. When the savings ratio is very small, it implies that households have fewer savings relative to their disposable income. In 2016, the ratio was at 5.2%, its lowest level since records began in 1963.</p>
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<h2>Trade balance</h2>
<p>One potential positive effect of the pound’s devaluation could have been an improvement in the UK’s trade balance – but that has not yet materialised. Standard <a href="http://www.economicsonline.co.uk/Global_economics/Marshall_Lerner.html">economic theory</a> predicts that currency devaluation will reduce a country’s imports (which become relatively more expensive), increase exports (relatively cheaper) and so improve the trade balance. </p>
<p>The UK’s trade deficit <a href="https://www.uktradeinfo.com/Statistics/BuildYourOwnTables/Pages/Table.aspx">was around</a> £30 billion at the time of the referendum in June 2016. Since then, although exports have risen by 12%, imports have risen at the slightly faster pace of 12.7%. As a result, the UK’s <a href="http://budgetresponsibility.org.uk/docs/dlm_uploads/Final_Model_Documentation.pdf">trade deficit</a> had worsened to £35 billion by the end of March 2017. </p>
<p>A trade deficit is not a problem per se, but a devaluation could have brought a sizeable increase in the export sector and helped to boost employment and wages. There are a number of reasons for why this did not happen, with one being that UK exporters <a href="https://marktomarket.org/2017/01/30/uktradeinflation/">have not</a> reduced the prices of goods sold abroad in foreign currency, and so just increased their profits per unit sold. </p>
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<p>The UK economy performed relatively well until the end of 2016, but there are signs that 2017 is going to be a challenging year. There is some <a href="https://www.ons.gov.uk/economy/grossdomesticproductgdp/bulletins/secondestimateofgdp/quarter1jantomar2017">evidence</a> – although early – that the economy is slowing down. Bloomberg’s Brexit Barometer, an <a href="https://www.bloomberg.com/graphics/2017-brexit-barometer/">index tracking</a> the impact of Brexit on the economy, has fallen in recent months, but does not put the economy in a “worse state” than before the referendum. </p>
<p>Of particular interest is going to be how households will react to the rise of inflation and the erosion of their real income given that their savings are at historically low levels. And don’t forget the increasing <a href="https://theconversation.com/brexit-why-uncertainty-is-bad-for-economies-64334?sr=1">uncertainty</a> that Brexit negotiations and tactics will bring to the economies of both the UK and EU. </p>
<hr>
<p><em>Correction: The graph regarding trade balance has been updated with corrected figures. The accompanying text originally stated that the UK trade deficit was around £175 billion at the time of the referendum, and had worsened to £197 billion at the end of March 2017. This has been corrected to £30 billion and £35 billion respectively.</em></p><img src="https://counter.theconversation.com/content/79598/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Agelos Delis does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>It was going pretty well until 2017 began.Agelos Delis, Lecturer in Economics, Aston UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/702032016-12-12T01:13:38Z2016-12-12T01:13:38ZIt’s not just a drop in GDP that should worry us<p>It seems like we haven’t had much good economic news lately. This was neatly summarised in the drop in national output (GDP) of <a href="http://www.abs.gov.au/ausstats/abs@.nsf/mf/5206.0?opendocument&ref=HPKI">0.5%</a> due to weak investment, both private and public. </p>
<p>Private investment is <a href="http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/5206.0Main%20Features2Sep%202016?opendocument&tabname=Summary&prodno=5206.0&issue=Sep%202016&num=&view=">unexpectedly weak across most categories</a>. New building investment fell by 11.5%, construction investment fell by 3.6%, while mining investment fell for the 12th consecutive quarter. </p>
<p>This was all reflected in <a href="http://business.nab.com.au/wp-content/uploads/2016/11/2016m10-NAB-business-survey.pdf">a drop</a> in business confidence and business conditions in the September quarter.</p>
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<p>This is not what’s meant to happen when you have interest rates at record lows. Last week the RBA held the cash rate at the lowest ever rate of 1.5%. </p>
<p>The cash rate has been <a href="http://www.rba.gov.au/statistics/cash-rate/">falling steadily</a> from 4.75% since October 2011 – it has not risen once during this time. Falling interest rates are supposed to stimulate business investment and also consumer spending, yet this is weak too, growing at <a href="http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/5206.0Main%20Features2Sep%202016?opendocument&tabname=Summary&prodno=5206.0&issue=Sep%202016&num=&view=">below trend</a>.</p>
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<p><strong>Mining and non-mining investment</strong></p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/149523/original/image-20161211-31375-1uica1y.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/149523/original/image-20161211-31375-1uica1y.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=378&fit=crop&dpr=1 600w, https://images.theconversation.com/files/149523/original/image-20161211-31375-1uica1y.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=378&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/149523/original/image-20161211-31375-1uica1y.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=378&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/149523/original/image-20161211-31375-1uica1y.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=475&fit=crop&dpr=1 754w, https://images.theconversation.com/files/149523/original/image-20161211-31375-1uica1y.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=475&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/149523/original/image-20161211-31375-1uica1y.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=475&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Mining and non-mining investment.</span>
<span class="attribution"><span class="source">Australian Bureau of Statistics</span></span>
</figcaption>
</figure>
<p>The puzzle can be explained. When interest rates get very low they start to have the opposite to their intended effect on both households and businesses. </p>
<p>Households that are either in or approaching retirement have to save more to achieve their target nest egg of savings. This depresses consumption spending. No other than the RBA governor at the time, Glenn Stevens, acknowledged in a <a href="http://www.rba.gov.au/speeches/2016/sp-gov-2016-04-19.html">speech</a> in April that low interest rates were a big problem for savers. </p>
<p>The arithmetic is simple. If you as a couple want to generate a <a href="https://www.superannuation.asn.au/resources/retirement-standard">comfortable income</a> of $60,000 in retirement, you will need about $900,000 at an annual net return of 5% (after fees), if you are willing to run your capital down to zero after 25 years. You would obviously need more than that if you want to leave some capital at the end. </p>
<p>But 5% annual return is now looking very unlikely on a sustainable basis, given a low-risk asset allocation and a world of ultra low interest rates. About 3% (net) is more likely. In that case you will need roughly $1.1 million even if you are prepared to run your capital down to zero in 25 years. This isn’t even including any extras like a short overseas holiday once a year.</p>
<p>People understand this and are saving more to build a bigger nest egg, given such low returns. Other households that are building their wealth are tending to use lower interest rates to borrow in order to buy property. </p>
<p>Their consumption spending is more in the form of interest payments on their debts, rather than purchases of goods and services. The ratio of housing debt to household income has increased over the past three years from <a href="http://www.rba.gov.au/statistics/tables/">166% to 186%</a>. </p>
<p>And lower interest rates keep the Australian dollar lower than it would otherwise be. That makes overseas purchases more expensive, such as holidays and cars.</p>
<p><strong>New building investment</strong></p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/149521/original/image-20161211-31367-1wmpun2.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/149521/original/image-20161211-31367-1wmpun2.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=381&fit=crop&dpr=1 600w, https://images.theconversation.com/files/149521/original/image-20161211-31367-1wmpun2.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=381&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/149521/original/image-20161211-31367-1wmpun2.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=381&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/149521/original/image-20161211-31367-1wmpun2.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=479&fit=crop&dpr=1 754w, https://images.theconversation.com/files/149521/original/image-20161211-31367-1wmpun2.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=479&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/149521/original/image-20161211-31367-1wmpun2.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=479&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">New building investment.</span>
<span class="attribution"><span class="source">Australian Bureau of Statistics</span></span>
</figcaption>
</figure>
<p>As for businesses, why should they feel more confident about future sales revenue when the RBA thinks the economy needs stimulating, and when they see weak household consumption and other businesses reluctant to invest?</p>
<p>The apparently good news to come from the September quarter national accounts is actually dangerous. Australia’s terms of trade rose by <a href="http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/5206.0Main%20Features2Sep%202016?opendocument&tabname=Summary&prodno=5206.0&issue=Sep%202016&num=&view=">4.5%</a>, due to mineral price rises such as iron ore. This feeds into export income and in turn eventually into company profits and tax revenue. Therein lies the danger. </p>
<p>The last terms-of-trade boom, from 2000 to 2010, released rivers of tax revenue. This is not what Australia needs right now because it will not last. It will only allow our politicians to postpone the necessary long-term cuts in government spending. Even worse, it might encourage them to hardbake new spending programs that we can’t afford in the long run.</p>
<p>Instead, we need to remember what Nobel-prize-winning economist Paul Krugman famously <a href="http://www.oecd.org/std/productivity-stats/40526851.pdf">said</a>:</p>
<blockquote>
<p>“Productivity isn’t everything, but in the long run it is almost everything.”</p>
</blockquote>
<p>Sustained improvements in average living standards can only come from improvements in productivity. We know how to improve productivity, we just can’t muster the political will to do it. </p>
<p>We have become far too concerned with how to share a national economic pie that is in danger of shrinking, particularly in per capita terms, than in growing the pie.</p><img src="https://counter.theconversation.com/content/70203/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ross Guest has in the past received funding from the Australian Research Council.</span></em></p>Australia’s economic indicators are showing worrying signs, with business confidence falling in the face of continued low interest rates.Ross Guest, Professor of Economics and National Senior Teaching Fellow, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/643672016-08-26T02:17:28Z2016-08-26T02:17:28ZTwo million Aussies are experiencing high financial stress<p>A new study shows two million Australians are experiencing high financial stress which prevents them from coping in difficult situations, for example, in paying unexpected expenses such as a big mobile phone bill or the fridge breaking down. </p>
<p>Adults face these sorts of scenarios frequently. When they arise, people usually turn to savings, a credit card, or a friend or family member to help out. </p>
<p>Our report, <a href="http://www.nab.com.au/about-us/corporate-responsibility/our-programs-and-initiatives/social-and-financial-inclusion/financial-exclusion-research?own_cid=shortURL:financialresilience">Financial Resilience in Australia</a>, funded by the National Australia Bank, quantifies the amount of Australians: experiencing problems paying debts; meeting the costs of living; and accessing appropriate, affordable and acceptable financial products and services. </p>
<p>It also shows some Australians have trouble accessing social support in times of crisis and may have low levels of financial knowledge.</p>
<p>Our research measured financial resilience by the four key resources that support it: personal economic resources (such as savings), financial products and services (such as insurance), financial knowledge and behaviour (including financial literacy), and social capital (having social support in times of crisis, including friends and families). </p>
<p>Many Australians simply don’t have the resources to bounce back. For example, around:</p>
<ul>
<li>One in two adults have limited to no savings</li>
<li>One in two only have a “basic understanding” of financial products and services </li>
<li>One in ten have unmet need for credit and/or insurance</li>
<li>One in five have limited or no social connections</li>
<li>One in 30 stated they needed but did not have access to any form of government or community support. </li>
</ul>
<p>This has implications for the short and long-term impact on individuals and their families.</p>
<h2>Who is most at risk?</h2>
<p>Our research found secure housing, steady income, education, being employed and good mental health are strongly associated with financial resilience. </p>
<p>On average, financial resilience is significantly lower among people who are homeless, living in social housing, are short-term renters or live in student accommodation. </p>
<p>Financial resilience increases with the level of education and, unsurprisingly, people with very low personal incomes fare poorly. </p>
<p>Employment status is a key marker. People who are unemployed, underemployed, not in the labour force and those who only work odd jobs are more likely than their full-time employed counterparts to have lower levels of financial resilience.</p>
<p>People with a serious mental illness are significantly more likely to be in severe or high financial stress, are less likely to be financially secure and fare worse on each of the individual resource groups than people without mental illness. </p>
<p>The gender split in financial resilience is fairly even overall. However, the four components of financial resilience are influenced by gender. Women have lower general levels of economic resources than men, but men have lower levels of social capital than women. </p>
<p>People who were born overseas in a non-English speaking country have lower levels of resilience than those who were born in Australia. Finally, the influence of age on financial resilience varies and is often affected by other factors. </p>
<p>One in four study participants reported difficulties accessing financial services. The barriers are varied, but include cost, trust, poor and inadequate services, and (for a few) language, disability and discrimination. </p>
<p>This underscores the importance of making financial information, products and services more user-friendly and accessible. This will ensure these resources are available and accessible to everyone who needs and wants them in society. </p>
<p>The factors influencing financial security are not surprising. People who own their own homes, have a university-level education and have a personal yearly income of more than A$100,000, for example, have higher levels of financial resilience. However, only 35.7% of Australians are financially secure.</p>
<p>The prevailing attitude around financial problems is that individuals are solely responsible for their situation. Our research challenges this ideas as it shows multiple aspects to financial resilience, some out of the individual’s control. </p>
<p>The below shows how interlocked the different components of financial resilience are and when pieces of the puzzle are removed, the most vulnerable people are at risk.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/135575/original/image-20160826-11150-bc398a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/135575/original/image-20160826-11150-bc398a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/135575/original/image-20160826-11150-bc398a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=394&fit=crop&dpr=1 600w, https://images.theconversation.com/files/135575/original/image-20160826-11150-bc398a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=394&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/135575/original/image-20160826-11150-bc398a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=394&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/135575/original/image-20160826-11150-bc398a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=495&fit=crop&dpr=1 754w, https://images.theconversation.com/files/135575/original/image-20160826-11150-bc398a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=495&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/135575/original/image-20160826-11150-bc398a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=495&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The jigsaw of financial resilience.</span>
<span class="attribution"><span class="source">The Centre for Social Impact</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>At the moment social sector leaders are lobbying the government to scrap proposed budget cuts that <a href="http://www.acoss.org.au/media-releases/?media_release=unemployed-and-pensioners-collateral-damage-in-budget-fight">will reduce the amount of certain welfare payments</a>. Our research shows these same people have the least resilience to bounce back if they were to lose some financial support. </p>
<p>This is an example of how the government needs to play a more active role in understanding financial resilience and where support is needed. By understanding the often interrelated elements of financial resilience, tipping points and who is most at risk, prevention and intervention can be better tailored.</p><img src="https://counter.theconversation.com/content/64367/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dr Rebecca Reeve was part of the research team funded to complete this research by National Australia Bank (NAB) at the Centre for Social Impact (CSI) based at UNSW Australia. In addition to her role at CSI, Rebecca is also Senior Research and Advocacy Officer at The Smith Family. </span></em></p><p class="fine-print"><em><span>Professor Kristy Muir received funding from National Australia Bank to undertaken this research at the Centre for Social Impact (CSI) based at UNSW Australia. Kristy Muir represents CSI on the Financial Inclusion Action Plan leadership group with the Australian Government, Good Shepherd Microfinance and EY. Kristy Muir is a member of the NSW Premier's Council on Homelessness and on the committee for Opportunity Child.</span></em></p>A new report finds two million Australians lack the resources to bounce back when difficult circumstances arise.Rebecca Reeve, Senior Research Fellow, Centre for Social Impact, UNSW SydneyKristy Muir, Professor of Social Policy / Research Director, Centre for Social Impact, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/608472016-06-14T23:37:48Z2016-06-14T23:37:48Z22 ways to cut your energy bills (before spending on solar panels)<p>Winter is here! Despite many Australians opting not to heat their homes to the point of complete comfort, many of us nevertheless will soon receive a nasty surprise when the energy bills arrive.</p>
<p>With Australia’s historically cheap energy, old housing stock in many areas, mild climate and frequent emphasis on low building costs, many homes are little more than “<a href="http://www.theage.com.au/comment/australian-houses-are-just-glorified-tents-in-winter-20150608-ghj2ox.html">glorified tents</a>” when it comes to thermal performance. </p>
<p>Besides wanting smaller bills, many residents also want to improve comfort, <a href="http://www.thefifthestate.com.au/arts-and-letters/how-to-wipe-out-household-energy-bills-in-9-steps/76854">lessen their environmental impact</a> and <a href="https://theconversation.com/energy-star-ratings-for-homes-good-idea-but-it-needs-some-real-estate-flair-54056">boost their home’s value</a>.</p>
<p>So here is a list of 22 things you can do to improve your home’s energy performance – some cheap, some free, and some that can even make you some money up-front as well as cutting your bills. Of course, to reach the ultimate goal of a home <a href="http://www.domain.com.au/news/welcome-to-victorias-most-sustainable-community-the-cape-at-cape-paterson-20151218-glno5i/">heated and powered by 100% renewable electricity</a> you may still wish to put some solar panels on your roof, but why not consider the following actions first?</p>
<p><strong>1. Make sure you get the <a href="https://www.energymadeeasy.gov.au/">maximum discount</a></strong> on your energy bills. Although not available everywhere, in Victoria discounts of up to 38% are available on gas or electricity. Ring up your retailer and just ask, or threaten to switch, or better yet seek out a retailer that doesn’t treat their discounts like <a href="http://www.powershop.com.au/toolkit/">state secrets</a>.</p>
<p><strong>2. Monitor your power usage</strong> with the help of a <a href="http://www.smartmeters.vic.gov.au/interactive-devices">“smart” electricity meter or in-home electricity display</a>. This real-time (or near-real-time) information is more useful than the coarse monthly data commonly printed on energy bills. It can help identify appliances that have inadvertently been left on or those that draw excessive power when not in use.</p>
<p><strong>3. Heat your water off-peak</strong>. If you have a resistive-electric hot water storage tank, make sure it heats up at night, when off-peak power rates apply. In some areas, “<a href="http://switchon.vic.gov.au/bills-pricing-and-meters/flexible-pricing">time of use</a>” rates are available.</p>
<p><strong>4. Get rid of your ‘garage fridge’</strong>. It can cost hundreds of dollars a year to run an <a href="https://www.washingtonpost.com/news/wonk/wp/2014/11/26/why-its-not-okay-to-have-a-second-refrigerator/">inefficient 20-year-old fridge</a>, especially if it’s in a garage that hits 50°C in summer.</p>
<p><strong>5. Ditch your super-hot plasma</strong>. If you have a <a href="http://www.sustainability.vic.gov.au/services-and-advice/households/energy-efficiency/at-home/appliances/tvs-and-home-entertainment-systems">10-year-old television</a> that gets so hot you can fry an egg on the screen, check out the newer models that can use <a href="http://reg.energyrating.gov.au/comparator/product_types/32/search/">one-tenth of the electricity</a>.</p>
<p><strong>6. Install a modern showerhead</strong>, such as those designed with <a href="http://pure-electric.com.au/products/methven-kiri-satinjet-ultra-low-flow-4.5-litre">double-impinging jet technology</a> that use only 5 litres of water per minute. Old showerheads can pass up to 35 litres per minute. Why not grab a bucket and stopwatch and test yours?</p>
<p><strong>7. Insulate any exposed hot water pipes</strong>, including the <a href="http://www.valvecosy.com.au/">pressure-relief valve on your hot water tank</a>. Make sure hot water pipes do not <a href="http://mei.insights4.net.au/switching-gas-report-available-here">run uninsulated straight into the soil</a> in your garden. <a href="https://sites.google.com/site/homeenergyefficiencyresource/home/hot-water-cylinder-work/increase-insulation-of-existing-hot-water-cylinder">Insulate electrically heated storage tanks</a> where it is safe to do so.</p>
<p><strong>8. Check your heaters and air conditioning</strong>. Gas heating systems should be checked at least every two years by a qualified person, not least to keep <a href="http://www.esv.vic.gov.au/For-Consumers/Gas-and-electrical-safety-in-the-home/Gas-safety-in-the-home/Heating-your-home-safely-with-gas">poisonous carbon monoxide gas</a> at bay. All heating or cooling system filters should be cleaned regularly to improve energy efficiency and air quality.</p>
<p><strong>9. Inspect your ducts</strong>. Poorly installed or degraded ductwork can lead to big energy losses, which can go unnoticed for decades. Ensure that small children or animals have not gone under your house and damaged your gas heating ducts. Check also that air returns are properly “boxed-in” and do not draw air in from the wall cavity instead of from the living space. However, cleaning the inside of your ducts is not critical for energy saving, and risks damaging them in the process.</p>
<p><strong>10. <a href="http://passivehouse.com.au/page/blower-door-testing">Banish drafts</a></strong>, for instance by plastering over those ubiquitous <a href="http://www.hobsonsbay.vic.gov.au/files/f66b552b-d808-43b8-b55c-a41e00e00c4e/Blocking-Draughts-FAQ.pdf">wall vents</a> – relics from the days when homes relied on unflued heaters or gas lights. Seal off unused chimneys and fill any other cracks, gaps or holes around <a href="http://ecomasterstore.com.au/products/draughtdodgers-for-doors">doors</a>, windows, skirting boards, floorboards and architraves. Remember to close air-conditioning ceiling vents in winter. Ventilation should be controlled by opening windows, not by having permanent holes in the walls.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/126475/original/image-20160614-29222-124i05b.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/126475/original/image-20160614-29222-124i05b.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/126475/original/image-20160614-29222-124i05b.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/126475/original/image-20160614-29222-124i05b.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/126475/original/image-20160614-29222-124i05b.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/126475/original/image-20160614-29222-124i05b.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/126475/original/image-20160614-29222-124i05b.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/126475/original/image-20160614-29222-124i05b.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Older houses can be full of drafts, including from wall vents which are a throwback to times when homes were full of indoor pollution.</span>
<span class="attribution"><span class="source">Bidgee/Wikimedia Commons</span>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p><strong>11. <a href="http://efficiencymatrix.com.au/our-videos/">Eliminate ceiling-mounted downlights</a></strong> wherever possible. A small number of modern wide-beam LEDs can adequately replace a larger quantity of narrow-beam halogen downlights. Aim to have as few holes cut into your ceiling as possible, because these holes let heat escape in winter and let it in during summer.</p>
<p><strong>12. Install <a href="https://shop.ata.org.au/shop/led-downlight-insulating-cover">downlight covers</a></strong> over all downlights that protrude into accessible attic spaces. Not only does this reduce <a href="http://www.fire.nsw.gov.au/page.php?id=709">fire hazards</a> and keep out insects, but it will also reduce air flow through the roof.</p>
<p><strong>13. Replace all regularly used lights with LEDs</strong>. LEDs use a tenth of the energy of halogen or incandescent bulbs, so will pay for themselves in just a few months (even less in places where <a href="http://www.sustainability.vic.gov.au/services-and-advice/households/energy-efficiency/toolbox/how-to/replace-12-volt-halogen-downlights">free replacement</a> is on offer). Replace less regularly used bulbs with LEDs as and when they burn out, and vow never to buy a non-LED bulb again.</p>
<p><strong>14. Insulate your attic…</strong>. If you don’t have roof insulation, buy some. If you do, check it meets the recommended “<a href="http://www.yourhome.gov.au/passive-design/insulation">R value</a>” for your climate. Ensure all vertical attic surfaces (walls, skylight tunnels) are also insulated, and include a <a href="http://www.thefifthestate.com.au/innovation/building-construction/insulation-how-to-make-the-right-decision/72343">layer of aluminium</a> in your attic space. <a href="http://www.ata.org.au/wp-content/uploads/Thermal-Imaging-Presentation.pdf">Thermal imaging</a> can be used to identify existing flaws, such as gaps or sections of insulation inadvertently moved by tradespeople working in the attic. </p>
<p><strong>15. …and your floors and walls too</strong>. In cooler Australian climate zones, <a href="http://www.ecomaster.com.au/what-is-underfloor-insulation/">floor</a> and wall insulation can help keep heat in, making your home warmer and cheaper to operate.</p>
<p><strong>16. Cover your windows from the inside…</strong> with drapes, curtains or blinds. This will keep in heat at night and on cold winter days, and keep out the sun in summer. Cheaper or do-it-yourself thermal window treatments such as plastic films or even bubble wrap can be applied in some situations (just don’t expect to win any design awards).</p>
<p><strong>17. …and the outside</strong>. Trees, plants, external awnings, blinds or shade sails can all keep out the summer sun and stop windows getting hot. Remember that <a href="http://www.ata.org.au/wp-content/uploads/Thermal-Imaging-Presentation.pdf">significant heat will reflect</a> onto windows from sizzling decks, paved areas and walls (but not lawns). It’s better to keep out the sun in the first place rather than try to cool your house down.</p>
<p><strong>18. Double glazing</strong> for windows cuts out noise, improves security and <a href="https://www.ata.org.au/news/atas-new-green-home-heating-e-book">saves energy too</a>. For many Australian climate zones, I recommend that homeowners never buy a window in future that isn’t double-glazed. <a href="http://www.diydoubleglaze.com.au/ATA.pdf">Retrofit options</a> options such as “secondary glazing” are also available.</p>
<p><strong>19. Fit a pool cover</strong> if you have a swimming pool. Not only will this stop the water cooling down overnight in summer, but a cover can also minimise cleaning, chemical use and the running time for your filter pump. Consider upgrading to a <a href="http://www.energyrating.gov.au/products/swimming-pool-pumps">more efficient pump</a> if yours is more than a decade old, and ensure it does not run for more hours each day than required.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/126477/original/image-20160614-17209-1doru8y.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/126477/original/image-20160614-17209-1doru8y.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/126477/original/image-20160614-17209-1doru8y.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/126477/original/image-20160614-17209-1doru8y.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/126477/original/image-20160614-17209-1doru8y.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/126477/original/image-20160614-17209-1doru8y.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/126477/original/image-20160614-17209-1doru8y.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/126477/original/image-20160614-17209-1doru8y.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Remember to cover up when not sunbathing.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File%3ABackyard_swimming_pool_in_Queensland.JPG">Kgbo/Wikimedia Commons</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p><strong>20. Use reverse-cycle to heat your home…</strong>. If your home has <a href="https://theconversation.com/hot-summer-nights-and-cold-winter-evenings-how-to-be-comfortable-and-save-money-all-year-long-51046">reverse-cycle air conditioning (also known as a heat pump)</a>, this may be the cheapest way to heat, especially as <a href="https://theconversation.com/its-cold-in-my-house-and-the-price-of-gas-is-going-up-what-can-i-do-44824">gas prices rise</a>. On heat mode, reverse-cycle units harvest <a href="https://theconversation.com/the-cheapest-way-to-heat-your-home-with-renewable-energy-just-flick-a-switch-47087">free renewable ambient heat from the air outside your home</a> and pump it up to the toasty temperature you need inside. Having installed high-efficiency reverse-cycle units, I can heat my own home for <a href="http://renew.org.au/articles/comfortably-ahead-a-tale-of-two-heaters/">one-third of the cost</a> of ducted gas heating.</p>
<p><strong>21. …and your water</strong>. If your hot water system is nearing its use-by date, consider replacing it with a heat pump. This is an especially good option for homes that already have <a href="https://theconversation.com/get-more-out-of-your-solar-power-system-by-using-water-as-a-battery-37807">solar panels and low feed-in tariffs</a>.</p>
<p><strong>22. If you can <a href="http://energyfreedom.com.au/">eliminate all gas use</a></strong> in your home (for <a href="http://mei.insights4.net.au/switching-gas-report-available-here">space heating, water heating and cooking</a>), you can eliminate your gas bill with its nearly A$1 per day fixed supply charges.</p>
<h2>And then there is solar…</h2>
<p>In Australia these days, you won’t be paid much money for selling your electricity back to the grid. However, it might still pay to install solar if you can <a href="http://reneweconomy.com.au/2015/solars-inconvenient-truth-its-all-about-self-consumption-19817">consume most of the energy yourself</a>, by running your pool pumps, appliances, space heating and cooling devices, hot water system and even an electric car with solar electricity harvested during the day. </p>
<p>In future, as <a href="https://www.ata.org.au/news/grid-connected-batteries-economically-attractive-by-2020-ata-report">electricity storage batteries get cheaper</a>, there may be even more economic reasons to have solar panels on your roof.</p>
<p>This article doesn’t list every possible <a href="http://www.thefifthestate.com.au/politics/local-government/how-gamification-is-saving-brisbane-renters-thousands-on-energy-bills/82684">behavioural trick</a> or <a href="http://www.yourhome.gov.au/">home improvement</a>. Sadly, some homes will never be fantastic energy performers without significant modification. But hopefully there are a few things on this list that will work for you – even if it’s only a case of finally covering that drafty doorstep, or giving your creaking “beer fridge” a dignified retirement.</p><img src="https://counter.theconversation.com/content/60847/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>In addition to his role at the University of Melbourne, Tim has conducted over 400 home energy assessments/consultations working or volunteering with organisations such as the not-for-profit Moreland Energy Foundation - Positive Charge.</span></em></p>There are loads of things you can do to cut your energy bills - and many don’t involve stumping up any cash up-front at all.Tim Forcey, Energy Advisor, Melbourne Energy Institute, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/579612016-04-21T10:07:43Z2016-04-21T10:07:43ZCould gambling be the secret to saving when rates are so low?<figure><img src="https://images.theconversation.com/files/119535/original/image-20160420-25615-3o5x0r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Put it all on green?</span> <span class="attribution"><span class="source">Roulette table via www.shutterstock.com</span></span></figcaption></figure><p>Many interest rates in the U.S. are <a href="http://www.nytimes.com/2015/12/15/upshot/why-very-low-interest-rates-may-stick-around.html">close to zero</a> and <a href="http://www.wsj.com/articles/bank-of-japan-introduces-negative-interest-rates-1454040311">even negative</a> in some parts of the world, like Japan. </p>
<p>Not unexpectedly, U.S. <a href="https://research.stlouisfed.org/fred2/series/PSAVERT">savings rates</a> are also quite low as individuals ask themselves: “Why save a lot of money at a bank if I get no return?”</p>
<p>This situation has many <a href="http://money.usnews.com/money/personal-finance/articles/2015/07/15/why-our-savings-rate-is-falling-and-what-to-do-about-it">commentators</a> <a href="http://www.thefiscaltimes.com/2015/04/26/Americans-Low-Savings-Rate-Bad-Sign-Good-Economy">wringing</a> their <a href="http://www.economist.com/blogs/freeexchange/2013/04/saving">hands</a> because low <a href="http://www.jstor.org/stable/2729595">savings rates</a> are a problem for many reasons. </p>
<p>Individuals who don’t save face spending their golden years of retirement in poverty, instead of plenty. In addition, people with no savings face financial problems and potential ruin when unexpected large expenses occur and cannot help out their children with large bills like college or a down payment on a first home.</p>
<p>In the absence of a rapid increase in interest rates, which <a href="http://www.wsj.com/articles/fed-leaves-interest-rates-unchanged-lowers-outlook-for-further-increases-1458151656">appears unlikely</a>, is there anything we can do to change this problem and get people to save more? </p>
<p>As odd as it may sound, gambling could be part of the answer. </p>
<h2>A simple solution: prize-linked accounts</h2>
<p>One innovative idea for boosting low savings rates is through prize-linked savings accounts, also known as lottery-linked deposits. </p>
<p>The idea of prize-linked accounts is simple. Instead of receiving the full amount of interest on their savings, most people are given less money than they would otherwise and the remainder is distributed as prizes awarded randomly to some savers chosen by a lottery.</p>
<p>Pretend the average person receives US$2 each month in interest on a standard savings account. A bank offering a prize-linked account might instead give the account holder $1 of interest plus a small chance – slightly better than <a href="http://www.lse.ac.uk/IPA/images/Documents/PublicSphere/2015/Issue%203%20Singles/8-%20Prize-linked%20Savings.pdf">scratch tickets</a> – to win $10,000. The bank would gather the $10,000 prize money by pooling the extra dollars of interest held back from many savings accounts.</p>
<p>These lottery savings accounts are an innovative idea because <a href="http://www.wsj.com/articles/charles-r-schwab-raise-interest-rates-make-grandma-smile-1416441900">interest rates today are very low</a> and offer little or no incentive for people to save money. Low savings rates cause people to abandon traditional savings accounts and lead some people to seek higher rates of return in <a href="https://theconversation.com/explainer-whats-the-turmoil-in-the-chinese-stock-market-all-about-44457">very risky investments</a>.</p>
<p>Prize-linked accounts have the advantage of ensuring savers never lose their initial funds, unlike other forms of gambling where losers can go home empty-handed. </p>
<p>One example of how prize-linked accounts work is the <a href="http://www.savetowin.org/product-info/how-save-to-win-works">save-to-win</a> program, promoted by a <a href="http://www.d2dfund.org/overview">nonprofit with a mission</a> to boost financial security among the poor. Savers deposit their money in a special 12-month account. Every $25 deposited gets the saver one more lottery ticket. Each month some prizes are awarded, and in some locations there is also an annual grand prize of $10,000 for those people who kept money in the bank for all 12 months. </p>
<p>These rules encourage people to open accounts, leave money untouched and build savings. <a href="http://www.d2dfund.org/files/publications/STW_National%20Overview_2014.pdf">Evaluations</a> of these accounts since they began in 2009 suggest they are effective at boosting savings especially among the poor. </p>
<h2>History of prize-linked accounts</h2>
<p>Prize-linked savings accounts are not a new invention. The <a href="http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=344389&fulltextType=RA&fileId=S0968565005000119">first lottery savings account</a> was created in England in 1693 to help fund the Nine Years’ War against France. </p>
<p>It was a great success and raised a million British pounds for the government, which was about one-sixth of all public spending that year. Savers bought tickets for £10 each. Each ticket had a chance to win a grand prize of £1,000 per year for 16 years.</p>
<p>Tickets that won nothing in the lottery, however, paid interest of £1 per year for 16 years, providing the English Crown with a medium-term loan whose proceeds were used to fight a war. This was a huge success for savers because each £10 ticket returned a total of £16, plus a chance of winning a jackpot.</p>
<h2>Controversy</h2>
<p>Controversy has surrounded prize-linked accounts ever since their introduction in 1693. Initially, criticism was leveled against the accounts because they encouraged people to gamble, which many people viewed as immoral.</p>
<p>More recently, governments have been against the accounts because they divert funds from state-sanctioned lotteries. South Africa’s <a href="http://www.bloomberg.com/news/articles/2014-09-23/the-casino-coming-to-your-corner-bank">First National Bank created</a> a very successful account in which winners received a maximum payout of about $150,000. This program <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2441286">boosted savings</a> by the poor and unbanked in South Africa. However, that country’s Supreme Court ruled the accounts were illegal after the <a href="http://allafrica.com/stories/200803311066.html">state lottery commission complained</a> that its own sales were reduced as a result.</p>
<p>While many other countries have <a href="http://www.nber.org/papers/w16433.pdf">created prize-linked</a> savings accounts, the idea is relatively new in the U.S. The first prize-linked savings accounts were created in <a href="http://www.nytimes.com/2014/08/31/business/using-gambling-to-entice-low-income-families-to-save.html">Michigan in 2009</a>. </p>
<p>The successful introduction of these accounts in other states like Nebraska resulted in President Barack Obama signing into law in December 2014 the <a href="https://www.congress.gov/bill/113th-congress/senate-bill/1597">“American Savings Promotion Act,”</a> which enabled credit unions and banks to offer these accounts across the country. President Obama and Congress needed to revise the laws, because prior to the bill it was illegal for banks to engage in risky activities such as sponsoring a lottery.</p>
<p>States, however, also have to change their laws for this program to become widespread. One of the most recent states is <a href="http://www.d2dfund.org/news/2015/06/oregon_passes_prize_linked_savings_legislation">Oregon</a>, which passed legislation in June 2015 enabling banks to offer the accounts this year.</p>
<p>Very interesting but preliminary research is being done by University of Colorado Finance Professor <a href="http://conference.nber.org/confer/2015/SI2015/HF/Cookson.pdf">Tony Cookson</a>, who examined people in Nebraska and found that the introduction of lottery-linked savings leads consumers to reduce casino gambling. This means that these lottery-style accounts can not only boost savings rates but also encourage people to gamble less in casinos. While this is a win for consumers, it is problematic for states that are dependent on casino and lottery revenue to balance their books.</p>
<h2>A ‘special’ boost</h2>
<p>Prize-linked savings accounts are not the complete solution to low savings problems in the U.S. and elsewhere. Nevertheless, these accounts can help.</p>
<p>Encouraging people <a href="http://u.osu.edu/zagorsky.1/2015/02/02/emergencysavings/">to save</a> and build an <a href="http://u.osu.edu/zagorsky.1/2015/02/09/why3months/">emergency cushion</a> for a rainy day is important. Prize-linked savings accounts are one way to do this.</p>
<p>My bank recently sent me a mailing trumpeting the fact that because I am a long-term “valued” customer, my savings account got a special interest rate boost to encourage me to save more. Even with the “special” boost, I earned a grand total of $1.27 in interest for the month. This tiny sum gives me no incentive to spend less and save more.</p>
<p>However, a prize-linked savings account that did away with all of my paltry <a href="http://businessmacroeconomics.com/">interest</a> but gave me a small chance at earning enough money to actually buy something of value would definitely encourage me, and likely many others, to save more.</p><img src="https://counter.theconversation.com/content/57961/count.gif" alt="The Conversation" width="1" height="1" />
Lottery-linked accounts helped England wage its Nine Years’ War in the 17th century. Could it help the rest of us save more money today?Jay L. Zagorsky, Economist and Research Scientist, The Ohio State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/534232016-02-17T10:46:01Z2016-02-17T10:46:01ZOur finances are a mess – could behavioral science help clean them up?<p>The first few months of a new year can be a stressful time financially. The Christmas holidays typically lead to depleted savings and higher credit card balances, while tax season is right around the corner. </p>
<p>Unfortunately for most us, this isn’t a seasonal dilemma but a chronic problem that brings anxiety throughout the year.</p>
<p>Indeed, as many as <a href="http://assetsandopportunity.org/assets/pdf/2015_Scorecard_Report.pdfhttp:/assetsandopportunity.org/assets/pdf/2015_Scorecard_Report.pdf">44 percent of American households</a> don’t have enough savings to cover basic expenses for even three months. Without a savings cushion, even regular seasonal expenses like holiday celebrations may end up feeling “unexpected” and lead households to turn to credit to cover costs. </p>
<p>U.S. consumers currently hold <a href="http://www.federalreserve.gov/pubs/bulletin/2014/pdf/scf14.pdf">US$880 billion in revolving debt</a>, with an average credit card balance of almost $6,000. The picture is even more dire for lower-income households.</p>
<p>So how can we turn this around? Many tacks have been tried but fallen short for one reason or another. Fortunately, behavioral science offers some useful insights, as our research shows.</p>
<h2>What’s wrong with current approaches</h2>
<p>Typical approaches to solving problematic finances are either to “educate” people about the need to save more or to “incentivize” savings with monetary rewards. </p>
<p>But when we look at traditional financial education and counseling programs, they have had <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2333898">virtually no long-term impact on behavior</a>. Similarly, matched savings programs are expensive and have shown <a href="http://www.nber.org/papers/w18220">mixed results on savings rates</a>. Furthermore, these approaches often prioritize the need for savings while treating debt repayment as a secondary concern.</p>
<p>Education and incentives haven’t worked because they are based on problematic assumptions about lower-income consumers that turn out to be false. </p>
<p>The truth is lower-income consumers don’t need to be told what to do. On average, they are actually <a href="http://scholar.harvard.edu/sendhil/scarcity">more aware of their finances</a> and <a href="http://pss.sagepub.com/content/early/2015/02/12/0956797614563958.abstract">better at making tradeoffs</a> than more affluent consumers. </p>
<p>They also don’t need to be convinced of the value of saving. Many <a href="http://www.pewtrusts.org/%7E/media/assets/2015/02/fsm-poll-results-issue-brief_artfinal_v3.pdf">want to save</a> but face additional obstacles to financial health. </p>
<p>For example, these households often <a href="http://www.usfinancialdiaries.org/83-charts">face uncertainty about their cash flows</a>, making planning for expenses even more difficult. More generally, they have little room for error in their budgets and the costs of small mistakes can compound rapidly.</p>
<h2>Brain barriers</h2>
<p>In this volatile context, psychological barriers common to all people exacerbate the problem. </p>
<p>People have difficulty thinking about the future. We treat our future, older selves <a href="http://www.anderson.ucla.edu/faculty/hal.hershfield/resources/Research/Journal-of-Experimental-Psychology-General-2011-Bryan.pdf">as if they are strangers</a>, decreasing motivation to make tradeoffs in the present. Additionally, we <a href="http://www.sciencedirect.com/science/article/pii/S0022103111001995">underpredict future expenses</a>, leading us to spend more than precise budgeting can account for. </p>
<p>When we do focus on the future, people have a hard time figuring out which financial goals to tackle. </p>
<p>In <a href="http://journals.ama.org/doi/10.1509/jmr.14.0455">research that we conducted</a> with Rourke O’Brien of the University of Wisconsin, we found that consumers often focus either on saving money or on repaying debt. In reality, both actions simultaneously interact, contributing to overall financial health. </p>
<p>This can be problematic when people misguidedly take on high-interest debt while holding money in low-interest saving accounts at the same time. And, once people have identified building savings or repaying debt as an important goal, they have difficulty identifying how much should be put toward it each month. As a result, they rely on information in the environment to help determine this amount (like getting “anchored” on specific numbers that are presented as suggestions on credit card payment statements).</p>
<p>Unfortunately, the way current banking products are designed often makes these psychological realities worse. </p>
<p>For example, the information on many credit card payment systems nudges consumers toward <a href="http://pss.sagepub.com/content/20/1/39.extract">paying the minimum balance</a> rather than a higher amount. Budgeting tools assume income and expenses stay the same from month to month (not true for most lower-wage workers) and expect us to monitor spending against a long list of separate, complicated budget categories. </p>
<p>On a deeper level, the fact that banks offer credit and savings products separately exacerbates the psychological distance between paying down debt and building savings, even though these are linked behaviors.</p>
<h2>Behavioral banking</h2>
<p>The good news is that a range of <a href="http://pps.sagepub.com/content/10/6/749.abstract">simple, behaviorally informed solutions</a> can easily be deployed to tackle these problems, from policy innovations to product redesign. </p>
<p>For instance, changing the “suggested payoff” in credit card statements for targeted segments (i.e., those who were already paying in full) could help consumers more effectively pay down debt, as could allowing tax refunds to be directly applied toward debt repayment. Well-designed budgeting tools that leverage financial technology could be integrated into government programs. The state of California, for example, <a href="http://sd24.senate.ca.gov/news/2015-10-29-pro-tem-de-le%C3%B3n-announces-ca-%22digital-nudge%22-initiative">is currently exploring</a> ways to implement such technologies across a variety of platforms.</p>
<p>But the public and private sectors both need to play a role for these tools to be effective. Creating an integrated credit-and-saving product, for example, would require buy-in from regulators along with financial providers.</p>
<p>While these banking solutions may not close the economic inequality gap on their own, behaviorally informed design shifts can be the missing piece of the puzzle in these efforts to fix major problems. </p>
<p>Our research indicates that people already want to be doing a better job with their finances; we just need to make it a little less difficult for them. And making small changes to banking products can go a long way in helping people stabilize their finances so they can focus on other aspects of their lives.</p>
<p><em>Katy Davis, vice president of ideas42, a nonprofit that applies behavioral economics to design solutions to social problems, coauthored this article. Davis specializes in economic mobility and education projects.</em></p><img src="https://counter.theconversation.com/content/53423/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Almost half of Americans have trouble saving, while average credit card balances have swelled to $6,000. Can we turn this around?Hal Hershfield, Assistant Professor of Marketing, University of California, Los AngelesAbigail Sussman, Assistant Professor of Marketing, University of ChicagoLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/433332015-06-17T04:13:02Z2015-06-17T04:13:02ZAustralians are saving more, but are more comfortable with debt<figure><img src="https://images.theconversation.com/files/85320/original/image-20150617-23340-bqagzh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Household debt is three times what it was 20 years ago.</span> <span class="attribution"><span class="source">Image sourced from www.shutterstock.com</span></span></figcaption></figure><p>Australians know that adequate savings can help provide for a rainy day, help a family put down a deposit on a home, or ensure a comfortable retirement. </p>
<p>Debt also offers a way for households to make purchases that would otherwise be impossible and to achieve a higher current standard of living. Debt invested into an asset that will also grow in real value and is able to be serviced without placing too much financial pressure on a household, is generally considered to be good debt.</p>
<p>The key is balance. Since the 2008 financial crisis, Australians have actually decreased their propensity to take on debt and have increased their savings. But debt rates still remain uncomfortably high and there is evidence that this savings discipline is beginning to fade. Have we grown too comfortable with debt?</p>
<h2>Saving more, but more indebted</h2>
<p>Bankwest Curtin Economics Centre’s second ‘Focus on the States’ report, <a href="http://business.curtin.edu.au/local/docs/BCEC_Beyond_Our_Means_Report.pdf">Beyond our Means? Household Savings a Debt in Australia</a> finds Australians have more debt and are more comfortable with it. </p>
<p>While household savings portfolios have seen an increase of 54% in real terms since 2005, household debt has risen by 51% in the same period. Many households are able to access and service this debt, with higher debts associated with higher incomes.
On average, Australia’s estimated 9.1 million households have savings in the form of financial assets of $340,900 and debts of $148,700. </p>
<p>However, there is a gulf between those at the top of the distribution and those at the bottom. The inequality in the distributions of household savings and debt are considerably worse than the much talked about inequality in incomes. </p>
<p>The average household disposable income of the top 20% of savers is less than four times those in the lowest savings quintile. However, their savings at an average of almost $1.3 million is 200 times the bottom 20%. This top quintile may receive one-third of all income, but they own three quarters of the total value of savings in the form of financial assets. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/85216/original/image-20150616-5810-145cq3d.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/85216/original/image-20150616-5810-145cq3d.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=225&fit=crop&dpr=1 600w, https://images.theconversation.com/files/85216/original/image-20150616-5810-145cq3d.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=225&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/85216/original/image-20150616-5810-145cq3d.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=225&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/85216/original/image-20150616-5810-145cq3d.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=283&fit=crop&dpr=1 754w, https://images.theconversation.com/files/85216/original/image-20150616-5810-145cq3d.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=283&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/85216/original/image-20150616-5810-145cq3d.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=283&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Average household savings by savings quintile, Australia 2015 (mean $‘000)</span>
</figcaption>
</figure>
<p>The trifecta of debts, low (or no) savings and low incomes presents many low economic resource families with an unenviable challenge to maintain an acceptable quality of life for themselves and their families on a day-to-day basis.</p>
<p>Since the global financial crisis, the household savings rate have risen, with households exhibiting discipline in their expenditure at a time when the economic outlook was uncertain. In an economic downturn income can decline quickly while reining in spending can be more difficult, for both households and governments. Debts can quickly get out of hand and become unmanageable in this situation. </p>
<h2>Becoming used to debt</h2>
<p>While Australian households have decreased their propensity to take on debt and have increased their savings in the post-GFC period, household debt still remains three times higher now than what it was 20 years ago. Australians are now more comfortable with debt and currently hold debt equal to 1.5 years of income, whereas in the past they had only debt equivalent to six months of annual income.</p>
<p>The share of debt associated with investment property loans has tripled
from one-tenth to three-tenths between 1990 and 2015. </p>
<p>Unlike previous generations accustomed to more rigid financial products, current households can access a greater number of financial products, which have arguably become more complex and more flexible.</p>
<p>This flexibility delivers benefits, but with complexity comes risk and it is important to promote good financial decisions and encourage a longer term outlook. <a href="https://theconversation.com/your-home-as-an-atm-home-equity-a-risky-welfare-tool-22000">Mortgage equity withdrawal has become a popular tool</a> to derive a higher current standard of living by using the family home as collateral. </p>
<p>More households now use these schemes to smooth consumption or relieve short-term financial pressures. But this may have contributed to the average mortgage debt as a proportion of property values almost tripling over the last 25 years, rising from 10% to 28% since 1990.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/85219/original/image-20150616-5832-ijpxwv.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/85219/original/image-20150616-5832-ijpxwv.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=217&fit=crop&dpr=1 600w, https://images.theconversation.com/files/85219/original/image-20150616-5832-ijpxwv.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=217&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/85219/original/image-20150616-5832-ijpxwv.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=217&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/85219/original/image-20150616-5832-ijpxwv.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=272&fit=crop&dpr=1 754w, https://images.theconversation.com/files/85219/original/image-20150616-5832-ijpxwv.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=272&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/85219/original/image-20150616-5832-ijpxwv.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=272&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Ratio of housing debt to housing assets, June 1990 to December 2014.</span>
</figcaption>
</figure>
<p>Another issue is the use of superannuation savings to pay down mortgage balances, leading retirees to rely more on the pension.</p>
<p>So are we living beyond our means? With household debt to income ratios three times higher now than a quarter of a century ago, household debt up by over 50% in real terms over the last decade and the debt of those approaching retirement (55-64 year olds) up 64% in real terms, it would seem on the face of it to be true. </p>
<p>However, the reality is more nuanced. Household savings are growing faster than income and 8.5 cents in every dollar is being saved, and there is now $2 trillion tucked away in superannuation, while riskier investments are making way for more a more conservative approach. This is far better than we were 10 years ago, but with a note of caution that savings are again on the decline.</p><img src="https://counter.theconversation.com/content/43333/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The Bankwest Curtin Economics Centre is an independent economic and social research organisation located within Curtin Business School at Curtin University. The Centre was established in 2012 with support from Bankwest (a division of Commonwealth Bank of Australia) and Curtin University. The views in this article are those of the authors and do not represent the views of Curtin University and/or Bankwest or any of their affiliates.</span></em></p><p class="fine-print"><em><span> </span></em></p>We know saving is good and not all debt is bad. Where is our relationship to both?Alan Duncan, Director, Bankwest Curtin Economics Centre and Bankwest Research Chair in Economic Policy, Curtin UniversityRebecca Cassells, Adjunct Associate Professor, Bankwest Curtin Economics Centre, Curtin UniversityLicensed as Creative Commons – attribution, no derivatives.