Aussies pessimistic about the future, despite reporting record levels of financial comfort

Father and daughter sitting at table.

Despite still recovering their bearings after a difficult pandemic period, Australian households are as financially comfortable as ever, according to ME Bank’s latest financial comfort report. 

Taking into account 11 different measures including income, living expenses and debt levels, the report put Australian household financial comfort at 6.04 out of 10 in December 2021 — up by 3 per cent in the last year and 8 per cent higher than pre-pandemic levels.

Among the households surveyed, 27 per cent reported their financial comfort levels had improved — largely owing to increased cash savings and improvements around jobs, income and spending. 

Specifically, comfort with cash savings rose 16 per cent since the onset of the pandemic, while comfort around investments jumped up by 14 per cent. Both boosted Aussies’ confidence in their ability to weather a financial emergency. 

At the same time, many households are concerned their circumstances might take a turn for the worse in the future.

One in three households surveyed (32 per cent) believe COVID-19 will negatively impact their finances in the long-term. In comparison, just one in eight households (11 per cent) predict they’ll be better off.

“On the surface, the financial comfort of the average Australian looks better than ever, but it’s fragile – and has begun to fall for many households – especially those with low comfort,” said ME’s consulting economist Jeff Oughton.

“The rising cost of necessities (such as rent, food, fuel, etc.) combined with fixed or stalling income gains and the long-term impacts of COVID-19 is causing financial worry among many households.”

Renters under pressure 

Those worries are weighing on some groups more than others. Renters in particular are feeling the squeeze, with ME Bank finding that two out of every three members of the cohort (67 per cent) were experiencing rental stress.

This was most common among single parents, young singles and couples with no children, and retirees.

Extreme rental stress - which is when more than 60 per cent of someone’s household income goes towards rent - was experienced by almost one in five renters (19 per cent).

“Rental markets have tightened markedly across the majority of Australia and rents have risen significantly due to falling vacancies,” the report said.

“While there have been strong job gains, wages remain relatively subdued, emergency Government support has largely unwound, and rental moratoriums have ended.”

Australians experiencing rental stress

Rental payments as a proportion of disposable income - % of renters. (Source: ME Bank)

The recent reopening of international borders could put further strain on the cohort, as the return of international students boosts demand - and prices - for inner-city rentals.

Things have been markedly different for mortgage holders. Just 35 per cent of Australians servicing a mortgage reported directing more than 30 per cent of their disposable income towards repayments. This is down from 42 per cent in June 2021.

“A fall in the unemployment rate, historically low borrowing costs for home loans rates and the deferral of loan repayments by some households have helped contain mortgage stress,” the report said.

“Furthermore, many households are well ahead of their minimum repayments and have significant net equity or savings in their home.”

For information on mortgage and lending trends, visit our home loans statistics page. And if you’re in the market for a home loan, visit our home loan comparison page, or browse the selection below.

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