It may not have garnered the same attention as the surprisingly strong second-quarter GDP growth, but an equally striking fact in last week's national accounts was household savings had just hit a post-GFC low.

This week in finance: Jobs/unemployment (Thursday)

Jobs/unemployment (Thursday) NAB business survey (Tuesday), Westpac consumer survey (Wednesday)

NAB business survey (Tuesday), Westpac consumer survey (Wednesday) Chinese retail sales, industrial production, infrastructure investment (Friday)

It is not a new phenomenon. The household saving ratio — or the ratio of households' net saving to disposable income — has been shrinking since 2014.

What makes the latest figure uncomfortable is that there is now little fat left to trim, and on current trends households will be spending more they earn.

The ability of the Australian economy to keep growing in the face of a number of challenges in recent years owes a fair bit to the savings so prudently built up after the sobering experience of the GFC.

As JP Morgan's Tom Kennedy points out, the persistent decline in savings since 2014 has been an important part of Australia's real GDP growth performance, helping offset some of the spending drag associated with record low wages growth and an unemployment rate that has yet to fire up wages.

While the correlation between savings and spending is far from perfect, Mr Kennedy has drilled down into the figures, and is worried.

"Consumer spending is now outpacing disposable income, a clearly unsustainable relationship," he said.

Dis-saving: should we be worried?

That relationship is even more unsustainable now house prices are falling, according to Deutsche bank's Phil Odonaghoe.

"Strengthening housing wealth accrued by the household sector has been an important factor supporting the decline in saving. With house prices now falling, that support has been removed."

A slide into what economists call "dis-saving" — and everyone else knows as spending more than you earn — is rare, but not unprecedented.

Australian households spent a large part of the early 2000's "dis-saving", much to the chagrin of then-Reserve Bank governor Ian Macfarlane.

"It [borrowing] can't continue to grow like this," Mr Macfarlane told a parliamentary committee late in 2003.

Things were a bit different then. Wage growth was stronger, the economy was growing faster, household credit was growing at close to 20 per cent. It's growing at closer to 5 per cent now.

Mr Macfarlane's point was something would have to give — excesses would have to be curbed and household spending reined in.

He was correct. Something did give. The global economy blew up. Households stopped spending, savings soared and a recession was only just avoided.

Earn more or spend less

Mr Kennedy said the current slide towards dis-saving is not only contrary to households' usual preference to rebuild savings as house prices stall or fall, but also contrary to the regulators' drive to cut debt and increase equity in housing.

On Mr Kennedy's numbers, APRA's push to force investors from interest-only mortgages to start paying off debt with principal-and-interest loans acts like a 1 percentage point rise in the savings rate.

Mr Kennedy said in the medium term the savings/consumption ratio can only get back to a sustainable level by one of two means.

Either income growth needs to exceed consumption growth, or households need to spend less.

With unemployment still too high, and population growth too rapid to spark any meaningful acceleration in wages, it looks like giving the credit card a rest is the most likely direction.

RBA watching

And that has serious consequences for GDP growth that just hit a six-year high.

"The combination of high household debt, out-of-cycle mortgage rates hikes and a labour market that is not yet firing on all cylinders, will force an adjustment in household spending, which, combined with fading supports from the external sector, will drive real GDP growth lower from here," Mr Kennedy warned.

Deutsche Bank's Mr Odonaghoe said the RBA will be watching on again with a degree of concern.

"Our sense is that we are pretty close to a cyclical low-point in the household saving rate," Mr Odonaghoe said.

"Certainly, a further sharp decline in saving would likely be a troubling development for policymakers, and would attract greater attention from the RBA and Treasury than has been the case to date."

That of course is the third, but unsustainable option. Keep following the same trajectory and spend more than you earn.

That would see the current account deficit blow out, regulators' cherished goal of financial stability take a hit and the record-breaking run without recession put at risk.

Markets hit by trade turbulence

US President Donald Trump, aboard Air Force One, told journalists he was considering applying tariffs to all Chinese imports. ( AP: Evan Vucci )

A mid-flight media briefing on Air Force One from President Donald Trump on the likelihood of an escalation of the trade conflict with China was enough to see Wall Street not nose-dive, but lose some altitude.

"The $200 billion [in tariffs] we are talking about could take place very soon depending on what happens with them. To a certain extent it's going to be up to China," Mr Trump said.

"And I hate to say this, but behind that is another $267 billion ready to go on short notice if I want. That totally changes the equation."

Add to that the NAFTA talks with Canada going nowhere and Japan now being threatened with tariffs, it's no wonder it has been a "risk-off" few days.

US jobs data was strong, with expectation-beating job creation and wages growth hitting a post-GFC high.

While seemingly good news, investors sniffed a hint of inflation in the numbers, and with that, the prospect of interest rates rising more quickly than anticipated.

All the key indices dropped. The tech-dominated Nasdaq fell to a six-month low after Apple said it may be affected by the tariffs.

Tesla shares were "smoked" on Friday, down 6pc, after founder Elon Musk lost more key executives and multi-tasked on a radio interview. ( Youtube: Joe Rogan Experience )

The highlight, or lowlight depending on perspective (and views on bad punning) was Telsa boss Elon Musk smoking a joint on air as he lost both his chief financial officer and HR chief in rapid succession, while the company's share price tumbled another 6 per cent.

There is a research paper waiting to be written about the whole "cause and affect" dynamic in Mr Musk's very odd afternoon.

All the key global markets lost ground over the week. The US fell 1 per cent, China, Japan and Europe lost more with Australia puffing along in their wake, down 2.8 per cent.

Futures trading suggests more ground will be lost when the ASX re-opens on Monday. The Australian dollar is back to where it was back in early 2016, barely holding above 71 cents against the US dollar.

Markets on Friday's close: ASX SPI 200 futures -0.4pc at 6,108 ASX 200 (Friday's close) -0.3pc at 6,143

ASX SPI 200 futures -0.4pc at 6,108 ASX 200 (Friday's close) -0.3pc at 6,143 AUD: 71.1 US cents, 61.5 euro cents, 55.0 British pence, 78.8 Japanese yen, $NZ1.09

AUD: 71.1 US cents, 61.5 euro cents, 55.0 British pence, 78.8 Japanese yen, $NZ1.09 US: Dow Jones -0.3pc at 25,917 S&P500 -0.2pc at 2,902 NASDAQ -0.3pc at 7,903

US: Dow Jones -0.3pc at 25,917 S&P500 -0.2pc at 2,902 NASDAQ -0.3pc at 7,903 Europe: FTSE -0.6pc at 7,278 DAX flat at 11,960 EuroStoxx50 -0.1pc at 3,293

Europe: FTSE -0.6pc at 7,278 DAX flat at 11,960 EuroStoxx50 -0.1pc at 3,293 Commodities: Brent oil +0.4pc at $US76.83/barrel, Gold -0.4pc at $US1195/ounce, Iron ore $US68.50/tonne

Jobs rebound

Labour force figures (Thursday) will be the key focus of the week, with jobs expected to rebound after the surprise loss in July.

The forecast is for around 15,000 new jobs in August, with unemployment holding at 5.3 per cent.

The NAB's business survey (Tuesday) and Westpac's look inside the minds of consumers (Wednesday) should continue to track above average levels, despite the political brouhaha bubbling along in Canberra over the survey period.

RBA assistant governor Michele Bullock drives down to Albury (Monday) to discuss "The Evolution of Household Risks". It will be interesting to see whether falling household savings gets a mention.

Central banks meet

Overseas, China puts out its monthly data dump (Friday). The expectation is that a bit of credit easing here, and some government spending there, should stabilise things.

Central bankers are busy, if you call the expected holds by the Bank of England and ECB (both Wednesday) busy.

It's in the volatile emerging market where the fun will be.

Argentina's central bankers meet on Tuesday with gloomy resignation. They have jacked up rates to 60 per cent — which puts Australian mortgage hikes of 0.15 per cent into some sort of perspective — and still the peso's value has halved this year. They might hike again, they might not. Will it really make a difference?

Turkey's central bank, the TCMB, having previously fallen in step with President Tayyip Erdogan's demands not to raise rates, looks like it may now raise rates as inflation heads towards 20 per cent.

In Russia, Prime Minister Dmitry Medvedev has made it clear rates shouldn't rise. Central bank governor Elvira Nabiullina has been equally clear in her determination that rates need to rise to head off inflation there.

It's not a comfortable position to be an independent thinker in the Russian administration.

The Russian, Turkish and Argentinian central bankers must look at their colleagues in Australia with envy. The RBA is now into its second year on hold, and another year of doing nothing looking like a reasonable bet.

Australia

Date Event Comment Monday 10/9/2018 RBA speech Assistant governor Michele Bullock speaks on "The Evolution of Household Risks" in Albury Banking royal commission resumes Insurance sector under the microscope in this two-week block of hearings Tuesday 11/9/2019 Business survey Aug: NAB survey. Both business conditions and confidence have eased recently, but off high levels Wednesday 12/9/2019 Consumer sentiment Aug: Westpac series. Running a bit above long-term average. Solid economic news likely to outweigh the drag from politics Thursday 13/9/2019 Jobs/unemployment Aug: Jobs growth has been slowing. The forecast though is for another 20K new jobs & unemployment at 5.3pc

Overseas