Value Shrinks – How Inflation Erodes Saved Assets

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Austrians are richer than ever: 872 billion euros in financial assets is a record. But this is only good news at first glance: in real terms, i.e. adjusted for inflation, financial assets have fallen since 2022.

In June, this fell by one percent in real terms compared to the previous year, and the purchasing power of assets also shrank in 2023 (-5.1 percent) and 2022 (-10 percent). “It doesn’t actually make us any richer,” says Johannes Turner of the National Bank.

More wages no longer flow to consumption
Austrians save significantly more and invest less; consumption uncertainties are high; Although real incomes rose by 3.2 percent, people stopped buying. This puts pressure on the economy, which is not benefiting from wage increases as hoped.

23.4 percent of expenditure goes to housing, before Corona this share was only 21.8 percent. 13.5 percent of expenditure goes on food and 13.1 percent on expenditure in restaurants and hotels.

There is a lot of money in savings accounts
Whatever is left at the end of the month is kept. The savings rate is currently high at 11.4 percent. In this country a large amount of money flows into deposits (savings accounts). Due to the high interest rates, many people have reorganized their savings: in June only 61 percent of their savings were available daily, compared to 70 percent before the interest rate was increased. But the fact is that even with a higher interest rate and a longer term, the return on savings accounts does not even compensate for inflation.

And there are also shifts in lending. The majority now have a fixed interest rate. This is how households respond to interest rate changes, Turner says.

We invest remarkably little in (pension) provision products. Only 15 percent of financial assets are tied up there; internationally the average is 29 percent. The Federal Treasury, which offers citizens the opportunity to invest in government bonds, has been very popular in recent months. Two billion euros have been spent on this.

Source: Krone

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