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Government lifelines, including the JobKeeper and JobSeeker payments, are having an impact, with more Australians feeling comfortable about their financial position, a new report has found.
Research conducted by ME Bank has found that Australian household financial comfort levels increased by 3 per cent to 5.76 (out of 10) in the past six months to June 2020 − just shy of its historical high of 5.78 recorded in December 2014.
Contrary to expectations, financial comfort has jumped the most among typically struggling cohorts – such as casual workers, the unemployed, low-income households and single-parent households.
That being said, while these groups might be benefiting from greater government stimulus measures, the report highlighted that their comfort level remains much lower than the average household and higher-income earners.
ME Bank’s consulting economist, Jeff Oughton, attributed the high financial comfort to a combination of prudent financial actions by households in response to both the health and economic crisis and unprecedented government support.
“Fear of COVID-19 and a very weak labour market triggered many households to increase precautionary savings, reduce spending, draw on long-term savings such as superannuation, and delay bills or loan repayments,” he said.
Dangling at the end of a cliff
Despite some Australians finding themselves in a more comfortable financial position, many are struggling to make ends meet due to the crisis.
The report notes that in June, only 32 per cent of households indicated they could “maintain their lifestyle for more than three months if they lost their income”.
Many households were already under pressure before COVID-19, particularly with low household income growth and cost of living concerns.
“Financial comfort levels are up for now, but many households are on the cliff’s edge. They’ve lost income, their jobs and entire livelihoods. Their wafer-thin savings buffer is dwindling, and government support is the main action stopping them from falling over,” Mr Oughton said.
Not only are Australians finding it harder to make ends meet, many could not change their position if they wanted to, the research found.
A record number of workers reported that it would be “difficult to find a new job in two months if they become unemployed” − up 10 points to a new survey record of 59 per cent. Notably, almost 30 per cent indicated it would be “very difficult”.
Furthermore, the proportion of part-time or casual workers seeking more hours jumped to 39 per cent, compared with 27 per cent six months ago. On average, these workers would like an extra 18 hours per week, compared with 17 in December 2019.
“This survey shows that the financial consequences for households of this pandemic remain critical. Many eyes will be on what governments do in the final months of 2020 and into next year,” Mr Oughton noted.
Key winners and losers in ME’s Household Financial Comfort Report:
Winners:
- Single parents – greatest increase in financial comfort across households (up 13 per cent to 5.04)
- Households with low comfort – record-high comfort (up 9 per cent to a still very low 3.49)
- Households with low savings (<$1,000) or low annual income (<$40,000) – comfort increased by 19 per cent to 4.19 and 18 per cent to 5.15, respectively
- Unemployed – comfort increased by 30 per cent to 5.17
- South Australian households – comfort hit a new high and sits above the largest states (up 13 per cent to 5.90)
- Baby Boomers, Gen Z and Gen Y – largest rises in comfort across generations.
Losers:
- Households with average ($75,000 to $100,000) and high (>$100,000) annual incomes – comfort decreased by 4 per cent and 2 per cent to 5.67 and 6.37, respectively
- Gen X – the lowest level of financial comfort of the generations, unchanged at 5.35
- Victorian households – comfort fell by 3 per cent to 5.64
- Part-time employed – comfort fell by 6 per cent to 5.56.
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