Savings rate quartiles by income decile

An interesting chart from the Tax Working Group’s interim report:

According to this data, the median savings rate is only positive for households earning more than $81,000 after tax per annum.

The lower quartile savings rate only begins to become positive for the top decile earning more than $139,000 after tax.

The bottom 25% of households earning $112,000 to $139,000 after tax per annum have a savings rate of -2% even at the 9th decile of unequivalised household income.

It would be interesting to see a more granular break down of this data on an equivalised basis if possible. 

One of the more interesting submissions to the Tax Working Group was that of fund manager Milford Asset Management. They included this comparison of national savings rates across major countries:

Nothing good comes from being a net importer of capital from overseas with enormous population increases but no real per capita gains. 

If the only households doing any substantial saving are in the higher income deciles, and those on lower after tax incomes are dissaving significantly, then what is really behind that?

Maximising consumption over one’s lifetime through borrowing when young, repaying debt and saving as you age, to run down capital in retirement, may perhaps explain what is going on here. 

But no matter what is behind the lack of saving – lower incomes, higher cost of living, house prices and rent – the fact it isn’t happening for vast numbers of households accompanied by a substantial increase in household debt doesn’t bode well for the future.

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