Price check: Jobs, income and rates weigh on cost weary Aussies, MLC report

Which money matters are most on your mind right now? If you answered with any of the following, you're in good company:

• Household income

• Job security

• High interest rates

• Home loan costs

These concerns have been highlighted in MLC's new Financial Freedom Report and perhaps aren't surprising given the range of ongoing costs Aussies have had to handle the past two years.

Yes, the so-called "Cost Of Living Crisis" lingers and that means many are still worried about money and are trying to adjust to a range of rising expenses, from their home loans to buying the weekly groceries.

The reasons for some of these things remain mirky to the average punter, but in brief, inflation is still higher than the Reserve Bank’s target band (2-3%) at 3.8%, and if that wasn't enough, interest rates are being held by the Reserve Bank at 4.35% because, in part, said inflation remains high.

Aussies households forced to adjust budgets

And yet, economic growth is weak, unemployment has ticked up (up to 4.1% in June, ABS) and many Aussies are still doing it tough on their expenses, including higher rates on home loans.

So as you might expect, household concerns persist. For example, Mozo’s data shows that 42% of people are very concerned about being able to afford higher costs. Almost as many have at least some concern (41%). 

Additionally, almost half of those surveyed by Mozo (48%) feel their finances “are out of control.” Even those who didn’t feel a loss of control have had to make changes however. Mozo found that 35% of Aussies have had to adjust their finances to meet the challenges of high costs. 

Higher debt, less savings

MLC's study supports the view that many Aussies are still doing it tough, while other countries such as the US and UK have already curbed high inflation.

Australia's Reserve Bank might not be in lock-step with the US Fed on this (we are said to be a couple of months behind in the interest rate cutting cycle), but at the same time it's under the microscope for its handling of the current inflationary levels by the International Monetary Fund.

Without getting to deep into the weeds, the IMF recently noted that the government's May budget added more money into the Australian economy than it removed, which means it was 'expansionary'. Expansionary budgets typically include tax cuts, rebates and increased government spending on infrastructure projects, most of which leads to boosting economic demand and growth.

Supply and demand

Very generally, more demand keeps prices high. And if nothing much changes for most Aussies in this type of economy, it's living costs that continue to be a very real challenge.

Most in the MLC findings indicate a range of hurdles to overcoming such high living costs, including their current income (34%), interest rates (25%), not owning a home (17%) and a lack of job security (13%).

The study also showed that a lot of people recognise their own use of money – including being in debt (21%), not having savings (20%), and current spending habits (16%) – is holding them back from achieving their dreams.

Of course, having extra debt and a smaller amount saved isn't easily solved in the current scenario.

Gen X and Gen Y feeling high costs most

The pressures have been felt across all generations too, says MLC.

Generation X is feeling it most acutely (74%), followed by Gen Y (60%), Gen Z (58%) and Baby Boomers (57%), as per the survey results.

MLC head of technical services, Jenneke Mills says Australians view financial wellbeing as the ability to meet their financial needs, live free from financial stress and have the financial freedom to make choices. 

Many of these yardsticks were once a given, though not in 2024 when financial confidence has taken a hit.

“While they have big dreams, the report reveals many lack the confidence to achieve them,” Mills said. “The research highlights that in today’s world, developing good financial habits, underpinned by family support, is key to building confidence and achieving those dreams.”

What’s ahead? Supermarket prices in focus

Every week, research firm Roy Morgan checks consumer sentiment and its mid-October report found that the view of personal finances among Aussies has dropped, with only one-third of respondents expecting their family to be ‘better off’ financially this time next year while 31% expect to be ‘worse off’.

As noted, ongoing high-than-normal-expenses are at the centre of this feeling, and have also been the subject of recent scrutiny by the Australian Competition and Consumer Commission (ACCC) as it targets inflated supermarket prices .  

This is welcome news but admittedly some faith has been lost among Aussie punters. Westpac reports that household financial pressures right now are still “intense”,  led by a decline in purchasing power over the last two years. It also says that small improvements around family finances have been more than offset by a loss of confidence in the economy. 

Silver linings - home loan rate relief?

Presumably if high consumer prices could be eased and higher interest rates on financial products such as home loans and personal loans could be cut, it would go a long way toward improving the way many Aussies feel about their current budgets. 

The Reserve Bank next meets on November 4 when it will make a decision on the current interest rate, which would at least set in motion the prospect of rate cuts on home loans - and maybe a little bit more control over this tiring Cost Of Living saga.

If you're wanting to save more money amid all these high costs, a better savings interest rate can help. Here at Mozo we highlight some leading Savings Accounts, which you can start comparing below.