Additional savings could provide fuel for the rebound

The 7.9% q/q recovery in consumption in Australia in Q3 still left it 6.8% below pre-virus levels. Even excluding Victoria, consumption only recovered to around 4.5% below pre-virus levels. And since the huge stimulus payments continued and labour income largely recovered, disposable income rose kept rising. Taken together, that meant that the household saving rate only fell from 22.1% in Q2 to 18.9% in Q3. In New Zealand, the saving rate dropped back to pre-virus rates in Q3 as consumption rebounded to be 0.6% above pre-virus levels. (see Chart 1.). Even so, the excess savings so far this year are worth around 2.8% of nominal consumption in New Zealand and 9.8% in Australia. We’ve assumed that that money will largely be used to pay down high debt levels. But if it is spent on household consumption next year it would pose an upside risk to our already above consensus forecasts that GDP will grow by 4.5% in Australia and by 6.0% in New Zealand in 2021.