Consumer expected to continue saving, paying down debt

Consumers remain risk-averse and are likely to continue managing their household budgets as they did in 2014 - preferring to save and reduce debt rather than take on new borrowings.

According to ME Bank's latest Savings Intentions survey, low interest rates have not had any influence in changing Australians' conservative financial goals. Saving remains a top priority.

Savings goals include paying off a mortgage, paying off debts, saving for a holiday, car or other large expense, building "rainy day" savings and saving for retirement.

An ANZ-Roy Morgan Australian Consumer Confidence survey conducted in mid-January found that consumer confidence is below its average level of the past four years and has been stuck at that low level since the middle of last year. According to the survey report, this "lack of momentum" in consumer confidence suggests that households may be saving rather than spending.

As a result of efforts to reduce mortgage and personal debt levels, households report higher levels of "comfort" with their borrowing levels. According to ING Direct's latest Household Financial Wellbeing Index, 68 per cent of Australians say they are "very comfortable" with their home loan - an all-time high for the survey.

Almost half of all homeowners are making the most of the current low interest rate environment and are getting ahead of their home loan repayments, with 44 per cent paying down ahead of time (up from 33 per cent a year earlier). ING Direct found there was also a high level of comfort with credit card debt.

The latest RaboDirect Financial Heath Barometer came to much the same conclusion: in 2014, 14 per cent said they were uncomfortable with their ability to repay their debt, compared with 16 per cent in 2013.

ME Bank says savings rates would be even higher if people were better at managing their household budgets. It says a lack of discipline when it comes to money is preventing Australian households from meeting their financial goals.

Fifty-nine per cent of respondents to the Savings Intentions survey said they didn't "consistently" set a budget. Of those who do, only 41 per cent stick to their budget.

Thirty-eight per cent keep written or electronic records of their spending -  a requirement for realistic and effective budget planning, according to ME Bank.

The most popular savings strategy is to transfer money to a savings account when spare funds are available. Forty-seven per cent say they take this approach, compared with 22 per cent who have an automatic transfer to a savings account and 16 per cent who add funds to a home loan offset account.

One area where the personal finance market is growing strongly is car finance. According to a recent IBISWorld report, the amount borrowed to buy new cars has risen at an annualised rate of 15 per cent over the past five years - the fastest growing segment in the personal finance market.

The total number of new cars sold in 2009 was 916,050, when the average amount of finance per car was $3718. In 2014 the number of sales was 1.1 million and the average amount of finance per car was $6110.