Low wage growth keeping Australians from hitting their 2020 financial goals

If it’s seeming more and more difficult to save money nowadays, you can take some solace in knowing you’re not the only one. A recent study by ME found that inadequate incomes are the main thing keeping Australians from reaching their financial goals in 2020. 

Of 1,000 people surveyed, 52% admitted their income was holding them back, while 48% listed the cost of living expenses as another significant barrier. Poor discipline and lack of financial knowledge rounded out the list.

Overall, most Australians aren’t too optimistic about their ability to save, with only a quarter of respondents saying they were ‘very likely’ to hit their financial targets.

As for what those targets are, ME found that most Aussies were saving for a holiday, car, or expense other than a home. In order, the top five most important financial goals were:

• Saving for a holiday, car, or non-property expense
• Building up rainy day savings
• Saving for a home
• Reducing expenditure on expensive habits
• Tackling debt

Low wage growth the new normal

Australia has been contending with sluggish wage growth for a while now. For the past five years it’s remained anchored at around the 2% mark, considerably lower than the 3-4% increases that were standard prior to 2012.

And while there’s little risk that aggregate wage growth will drop any further, it’s unlikely we’ll see an improvement either. At a conference in November last year, RBA Deputy Governor Guy Debelle called low wage growth the new norm in Australia.

"The share of jobs that experience a wage change of more than 4% has fallen from over one-third in the late 2000s to less than 10% of jobs in 2018,” he said.

What’s keeping wages down?

Low wage growth can be chalked up to a few factors, such as the decline in the number of Australians receiving promotions or switching jobs since 2012, something which typically translates to a 5% increase in hourly wages. 

There’s also been an uptick in enterprise bargaining agreements which provide annual wage increases of only 2–3%. While these made up only 10% of all such agreements in the 2000s, they’ve since risen to almost 60%.

Another factor putting downward pressure on wage growth is the number of older Australians either delaying retirement or looking to re-enter the workforce, likely as a result of high levels of household debt.

How can you improve your financial situation?

While we might be waiting a while for a lift in wages of the kind we saw pre-2012 it might be worth examining your current situation and seeing if there’s any room for improvement. Here are just a few ideas to improve your financial health.

Push for a raise at work

Ideally, your yearly income should be going up at least in line with inflation. If not, rising costs of food, transport and housing will end up hitting your wallet hard. If you haven’t received one already, you should consider asking for a raise. 

Start budgeting

If you’re unable to increase your income, the second best thing you can do to help you save is reduce your expenses. Creating a budget will give you a clear picture of where your money is going each month, and from there you can identify what you can afford to cut out.

Find a high interest savings account

Most people don’t pay too much attention to how much interest they’re earning on their savings account, which is a shame, because it’s one of the easiest ways to make extra money. 

Nowadays, most savings accounts (and term deposits for that matter) don’t offer much to get excited about, but there are still some that offer interest of 2% or more. If you think you could benefit from a better place to keep your savings, be sure to check out our savings account comparison page for a look at some quality options.