ME reveals the three money worries keeping Aussies up at night
Australian households are becoming increasingly pessimistic about their financial future according to a new report, with the high cost of energy prices, looming interest rate rises and static income levels all contributing to household stress.
The June 2017 Household financial comfort report, released today by challenger bank ME, showed that while the overall household financial comfort index actually rose by 2% to 5.51 out of 10 in the last six months, the future outlook was worrying for many households.
“On the surface the financial comfort of the average Australian looks good, but it’s fragile – susceptible to housing stress and energy cost shocks,” said ME Consulting Economist and Report co-author, Jeff Oughton.
“But the cost of necessities remains the biggest concern for Australians and when combined with stagnating or falling income for up to nearly 70% of households, expected further rises in the cost of necessities like power prices, as well as rises in mortgage rates, the future doesn’t look as bright for some.”
The report found that the rising costs of necessities such as energy and groceries were increasingly leaving many Aussies out of pocket - with a staggering 51% admitting that they had no cash to spare at the end of each month.
Households were most worried about the cost of fuel and power, which is not surprising given the July 1 energy price hikes which are set to increase some power bills by up to $400 a year.
There was also concern among households about the potential impact of future RBA interest rate rises, with nearly a third of households (31%) admitting that they expected to be in a worse position financially if rates were to rise from the current level of 1.5% to 2.5%.
“Speculation the RBA will lift the cash rate is causing households concern as it will impact monthly cash flows, ability to pay off debts, save and spend,” said Mr Oughton.
“Gen Xers (41%), single parents (36%), and to a lesser degree, couples with young children (35%), expressed the most concern about potential rate rises.”
The third major concern for many Aussies proved to be in relation to stagnant income levels, with the report revealing that 27% of Australian households experienced a drop in income over the 2016-17 financial year.
This trend hit lower income earners the hardest, with 45% of households earning less than $40,000 reporting a decline in their income over the year.
On the flip side, households earning over $100,000 experienced lower rates of income decline (17%), with almost half (46%) actually reporting income growth over the period.
“Six months ago, we saw a clear income divide emerging between the rich and poor and in this Report, this gap is exacerbated further,” said Oughton.
“The average Australian household (those earning $75,000 - $100,000) is showing signs of subdued income growth, with 44% seeing no change in their income during the past financial year.”
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