Interest rates on savings accounts and term deposits have plummeted in recent years. That won’t come as any surprise to the country’s long-suffering savers, but the sheer number of cuts that have been passed down by banks in the last six months might.
Two-thirds of working Australians have had their employment affected by the Coronavirus, that’s according to research from Roy Morgan. Back in March there was a lot of uncertainty around how long the situation would last in Australia and how far reaching the effects would be.
As a grim economic outlook looms with nearly 1 in 10 Australians forecasted to be unemployed by December, it’s no surprise many are tightening their purse strings. The latest figures show most Aussies won’t be spending their 2020 tax return.ME Bank research released this week found that 58% of Aussies plan to add their tax return to savings, compared to 49% last year. There’s also been a switch in gears to more mindful spending. ME reveals a growing number of Aussies are looking to boost their financial position with their tax return, rather than splurge it on discretionary items. For instance, 21% intend to use the money on home loan repayments (up from 17% a year ago), while 18% want to invest it in shares or their super (up from 16%). But a small segment (22%) still plan to use their tax return on non-essentials like eating out, entertainment and travel - 1% lower than last year. These findings were based on surveys with 1,000 Australians in June 2020. The report comes as ANZ-Roy Morgan numbers released today indicate consumer confidence has dropped back down to 90.2 points (or 24.2 pts less than a year ago), following new COVID-19 outbreaks in NSW and Queensland. ME’s general manager of personal banking, Claudio Mazzarella said the current climate is propelling this shift from spending to saving.“The pandemic is clearly changing the financial habits of the nation. This survey illustrates how wary Australians are feeling in this economic climate,” he said.
It’s been another painful month for savers, with interest cuts dominating all changes in the at-call deposits world.*This brings the average ongoing savings account rate to 0.63%, down 19 basis points from last month.Australian Unity’s Active Saver is now leading the interest rate ranks at 1.75%. It’s overtaken former headliners like 86 400 and Bank of Queensland, which respectively shaved off 10bp and 15bp from their top savings accounts. However, to access Australian Unity’s bonus rate, customers need to deposit at least $250 a month and not dip into the account at all. Interest reduces to 0.25% if either of these criteria are not satisfied, making this a less accessible option for anyone experiencing income or employment instability.
From questionable hair choices to finding rotten food in your locker, high school memories stay with us. But what about the bits you’ve left behind, like economic lessons? According to a Household, Income and Labour Dynamics in Australia (HILDA) survey in 2019, fewer than half of Aussies could correctly answer five basic financial literacy questions. So, to get you back on track, here’s a quick crash course on the top five most important things you should know about your finances.
Australians have collectively withdrawn more than $31 billion in superannuation since the government introduced the early access super scheme, which aimed to help people manage financial hardship caused by Covid-19.But a new report has shown many may not be spending the cash injections – up to $10,000 accessible last financial year, with a repeat withdrawal available until December 31 – as intended, and others may not have needed the money to get by.No criteria or proof of hardship is required to access early super release through this scheme. The research from financial data and analytic company Illion shows 38% of people who accessed the money didn’t do so in response to a drop in income. A further 21% actually got a boost to their pay packet in addition to dipping into their super.Across both rounds of super withdrawal, a large portion have used the funds to increase spending, not simply maintain it. In the second wave, the report found 64% of this additional spend was on discretionary items like clothing, furniture, restaurant visits and alcohol.Essential spending is still in the equation, with Illion reporting this increasing from 22% to 24% across the two rounds of early super release.Overall, Illion has found women are more responsible spenders in this scenario, with a slightly higher proportion using it to pay off debt and cover essentials compared to men. Similarly, more men (10%) are spending this money on gambling compared to women (6%).
With the second Covid-19 wave underway, Aussies have pretty much resigned themselves to a travel-free 2020. Instead, Toluna’s ongoing Covid-19 Barometer shows that people across the country are focusing on spending locally and supporting small businesses in their area.
Nearly 90% of Australians have items that they either don’t want or don’t use in their homes, according to Gumtree’s 2019 Second Hand Economy report. The report shows that the average Aussie household is sitting on over $5,000 worth of unwanted goods that could be sold on.
If you’re an avid saver, then we don’t have to tell you that a year ago Up made the biggest reduction by shaving 25 basis points off its Saver Account (1.65%), meanwhile Xinja and 86 400 both cut 15 basis points off their savings products, bringing the rates down to 1.65% and 1.70%, respectively. “While the neobanks had managed to offer a glimmer of hope for the nation’s savers, these out of cycle cuts are a worrying sign,” said Mozo Director, Kirsty Lamont. “As they seek to attract new customers, we’ve come to expect the neobanks will buck the downward trend of the banks but with their savings rates also heading south they appear to be rejoining the pack.” According to the Mozo database, Australian Unity and MyState Bank currently offer the leading at-call savings rate of 1.75%, while the big banks severely lag behind with an average on-going savings rate of 0.54%, 121 basis points difference. Though there was some good news for younger Aussies looking to boost their savings balance, as Westpac launched its new Westpac Life account, boasting an impressive 3.00% for balances up to $30,000.
The Australian Prudential Regulation Authority (APRA) has estimated that a whopping $30 billion has been taken from superannuation accounts as a result of the Covid-19 pandemic. Whether Aussies are choosing to do this willing or because of little choice, it’s not painting a pretty picture for retirement. New research from Colonial First State has revealed that 23% of Aussies between the age of 30-65 believe they will have to delay retirement and work longer due to the pandemic. Almost half (45%) of respondents also confessed to either feeling scared or not financially confident about retiring. “The Coronavirus pandemic has significantly changed the world, not only socially but financially too. These are extremely challenging times for many people,” said Colonial First State’s general manager, Kelly Power.