Saving remains the priority over spending or investing

Australians are more comfortable with their financial situation but their outlook remains cautious, with the majority preferring to put spare cash towards savings and debt repayment.

ME Bank's latest Household Financial Comfort Report has recorded its highest "comfort" reading since the survey started in 2011. The improvement in sentiment was due to better equity market returns, growth in residential property values and higher savings buffers.

Respondents reported that they were better able to handle emergencies. Almost half of all households expect their situation to improve over the next six months.

Retirees went against the trend, saying that their standard of living was falling. Lower deposit rates are a cause of concern for this group, which draws a significant amount of its income from term deposits.

The big concerns for all households were the higher cost of living and the economy.

People continue to place a high priority on saving and reducing debt. Fifty-six per cent of households with discretionary savings said they would increase loan repayments rather than invest in shares. This number has increased by six percentage points since the last survey.

Fifty-one per cent of households reported that they were saving each month. Households that are saving are putting away an average of A$870 a month.

The biggest groups of savers are empty nesters (pre-retirees aged over 50) and young singles and young couples (adults up to age 35).

Fifty-seven per cent said they were comfortable managing their debts, while 30 per cent said they were just managing to make minimum loan repayments, and six per cent said they were falling behind.

These results echo the findings of two other consumer surveys published last week.

When asked what was the most enjoyable way to "spend" money, 26 per cent of respondents to ING Direct's Financial Wellbeing Index nominated "saving for a particular goal" and 17 per cent nominated "paying debt".

Twenty-nine per cent said they were "uncomfortable" with the level of their personal savings, meaning they would like to increase their savings.

ING Direct also found that the average number of credit cards per household has dropped from 1.8 to 1.7.

Respondents to the ING Direct survey said their biggest concern was the higher cost of living. Households need an extra $43 a week, on average, to pay their bills.

Dun & Bradstreet found that consumers saw lower interest rates as a way to more easily meet their debt repayments and reduce debt.