The winners and losers in ME’s latest Household Financial Comfort Report

Ceyda Erem

Monday 06 August 2018

You might be easily forgiven for dipping into your savings stash every now and again, but according ME Bank’s most recent Household Financial Comfort Report (HFCR), many Aussies have become dependant on routinely plundering their savings balance.

The winners and losers in ME’s latest Household Financial Comfort Report

The report found that more Aussie households are stretching their budget to cover necessary living expenses and are drawing on their savings to do it.

This has also meant that the confidence of having money on hand in times of an emergency has dropped by just over 10% during the first half of 2018.

And unfortunately, things could get worse for cash strapped Aussies before they get better.

“Clearly, this is a potential tipping point. At the moment, Australians generally can dip into their savings to get by. However, some households may get to a point where there’s no more savings to draw from. Currently, around a quarter of Australian households have less than $1,000 in cash savings,” said Consulting Economist for ME, Jeff Oughton.

“If we see big negative shocks in the coming year, whether they are higher loan rates or an international trade war, then a lot more families will suffer increased financial stress.”

RELATED: HILDA Survey highlights impact of low financial literacy on young Australians

And speaking of higher loan rates, part of the stress on many family budgets may come from the fact that 45% of households are contributing more than 30% of their disposable income to their mortgage.

Of these Aussies with debt, there was also an increase in the number who ‘will not be able to meet their required minimum payments on their debt’ and ‘can just make the minimum payments on their debt within the next 6-12 months’, jumping from 38% to 43%.

But the news wasn’t all doom and gloom, as renters had experienced some financial relief, thanks to the cooling property market.

“The good news for renters is that financial stress has lessened somewhat during the past six months, thanks to the housing market cooling and rents falling. While almost three-quarters (72%) of renters were previously contributing over 30% of their disposable income towards rent, this number dropped significantly to two-thirds (67%) in the most recent survey,” Oughton said.

RELATED: Tough times for Aussie savers as Big Four banks slash rates

The report also found that Aussie incomes haven’t shifted either within the last 12 months, and 42% of people still had the same income, while 24% had had their income cut. However, the remaining 34% received a wage rise.

The winners and losers of the HFCR

According to Oughton, the clear winners and losers in the latest HFCR were:

Winners

Self-employer workers

Self-employed Aussies experienced an 11% increase in financial comfort and was recorded as the largest rise for any work segment.

“With about 15% of the workforce self-employed, it’s clear a number of entrepreneurial Australians are opting to be their own boss, taking control of their own finances and are feeling the positive benefits in their household finances as a result,” said Oughton.

South Australia

Financial comfort in South Australia increased more than any other state or territory (up 16%).

According to Oughton, “South Australia’s rise in household financial comfort appears to be linked to the sustained and significant fall in unemployment, with households feeling more positive about their jobs, incomes and their financial position generally.”

Losers

Young singles and childless couples under 30

This group experienced an 11% drop in financial comfort, which according to the report, is linked to their low scores around ‘comfort with savings’ and the ‘confidence in handling a financial emergency’.

Empty nesters (50 years old and over)

Empty nesters felt a record blowing hit in financial comfort, falling 3%, or 7% below the average since the survey began.

“Recent changes to superannuation in the past year appear to be significantly impacting this life stage," said Oughton. 

"You may think that empty nesters would have fewer financial worries – most have paid off their mortgage, their kids have flown the coop, the majority are still working and some have voluntarily retired. However, many are still concerned about current finances as well as worried about their life after work, expressing an 8% drop in comfort with their expected standard of living for retirement, as well as a 7% fall in their ‘comfort with savings."  

Students

Finally, students recorded a massive decline of 15% to just 4.18% since the last report. 

“Students are always among those with the lowest financial comfort in each HFCR due to a lack of comfort with cash savings, investments, net wealth and their reduced ability to manage a financial emergency,” Oughton explained.

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