AUSTRALIAN households stashed away a record $70 billion during the past financial year, pouring money into banks and term deposits, yet when the financial year ended they were $6 billion poorer than when they started.
Financial accounts from the Bureau of Statistics show per capita wealth slid 2 per cent over the year to June and 11 per cent over five years to June, all because of falling share prices.
The rout has since been reversed, with share prices climbing 6 per cent since the start of July. But the sharemarket's uneven performance has encouraged Australians to park more of their savings in banks than ever before.
Households held a record $726.6 billion in cash and deposits at the end of June, accounting for 23.7 per cent of their financial assets, up from 21.9 per cent a year before.
"It's a safe haven approach, a knee-jerk reaction to uncertainty," Commonwealth Securities chief economist Craig James said.
"It comes down to confidence. People know about what has been happening in Europe, they know about the United States, and they know about China. So with deposit rates so high, why wouldn't you be putting anything extra you had into term deposits?"
It's not only households. The bureau's figures show superannuation funds had 15.9 per cent of their assets stored in cash and deposits at the end of June, the highest proportion on record and roughly double the long-term average of 8.5 per cent.
Private non-financial companies had a near-record 45.4 per cent of their financial assets stored in cash and deposits.
Foreigners have been buying shares where Australians have not, lifting their ownership of the Australian sharemarket to 47.2 per cent, the highest stake in 20 years. Foreign holdings of Australian government bonds eased back to 78.2 per cent from a record 79.8 per cent in March.
Per capita net financial wealth slipped from $65,044 to $63,675 over the financial year, despite increased saving. The figure excludes wealth held in the form of real estate but is weighed down by loans secured against real estate.
"What's encouraging for people who are paying off their own homes is that home prices went up in September, and that the sharemarket has been climbing. Household wealth could pick up," Mr James said.
"And time cures all ills. If we get some good news out of the United States and out of China and if people don't focus so much on Europe and if the Australian economy continues to track along nicely, people might start to feel wealthy again and put more of their money back into the sharemarket."