Bank’s latest Household Financial Comfort Report disclosed that 25% of the country’s households have less than $1,000 savings, with 11% of households spending more than their monthly income.
Majority of families are financially stressed because the cost of living in Australia continues to rise while wages stagnate. Households have no other recourse but to dip into their savings to fund their basic necessities.
Consulting economist on the report Jeff Oughton offered his opinion that the situation has become dire and is approaching a tipping point:
“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.”
“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.”
The Household Comfort Report shows that the key factor in pushing families into financial vulnerability was the lack of real wage growth.
According to the survey, 42% of the households still maintain the same income as a year ago, 24% had their incomes reduced and only 34 % received an increase in their take home pay.
“The report revealed increased confidence in people’s ability to find a job. However, high levels of job insecurity and under-employment remain,” said Oughton.
“Around 23 percent of casual and part-time workers said they would prefer to undertake full-time work if they could.”
Housing stress (when households allocate a bigger portion of their income to pay housing costs thereby compromising funds for basic necessities) is a recurring problem among Australian families.
45% of households are still battling with mortgage and rental stress, with 43% saying they “will not be able to meet their required minimum payments on their debt” in the next six to twelve months.
Fortunately, according to Oughton, the situation is not as bad for those who are renting property:
“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.”
Overall, Australia has a lot of ground to make up for. $1,000 savings is clearly not enough to sustain a lifestyle in a country where cost of living is far outpacing earnings and means to livelihood.