Australian families can bring down high interest rates by consuming less and saving more, a new study has found.
An increase in national savings by 2 per cent of GDP can reduce interest rates by 85 basis points within two years, according to Econtech research commissioned by the Investment and Financial Services Association (IFSA).
A failure to raise the level of household savings could cause retirement problems for baby boomer, The Economic Impact of Increased National Savings report found.
"To avoid a hard landing, it's important that households increases their savings," Econtech executive director Chris Murphy said.
Any policy to encourage household savings should be directed at the low and middle income earners, according to IFSA chief executive Richard Gilbert.
"That's where the deficiencies are," Gilbert said.
"That is where people are retiring with $80,000 to $90,000 [in private provision], that is not an economical future. Those people need a boost."
Although IFSA feels that it is not in a position to comment on Government policy, Gilbert said a broader co-contribution scheme or straight tax cuts would be two options to go about it.
Previous Econtech research commissioned by IFSA found that the low levels of household savings and the steady building of debt weighed especially heavily on the economy.
National savings are a combination of public, corporate and household savings.
In Part 2 of our exclusive series, we ask leading names to nominate their best investments, the most effective industry group and the importance of platforms.
Catholics revamp fixed interest »
Industry superannuation fund the Catholic Superannuation and Retirement Fund (CSRF) has revamped its fixed income portfolio.
Mercer backs alternatives »
Mercer has awarded $34.15 million in mandates to Tactical Global Management (TGM) and Lazard Asset Management to invest in alternative assets.
