Monday 3 February, 2014
Findings from ME Bank’s latest Household Financial Comfort Report, including:
• Job security a top three concern for Australian households
• Households remain financially cautious with investments and debt
• Half of Australian households still struggling to save
Download the report here (PDF 980kb).
ME Bank’s latest Household Financial Comfort Report shows the RBA has time to ‘wait and see’ on rates, with rising job insecurity and continuing financial caution by households among the key findings.
According to the Report, job insecurity is now a ‘top three’ concern among households, rising 5% to 31% of households in the past six months to December 2013, while concern about ‘finding a new job within two months if unemployed’ also rose 1% to 55% of the working population, over the same period.
Jamie McPhee, ME Bank CEO, said: “The rise in job insecurity, a result of increasing unemployed persons and increasing casual/part-time jobs, is exacerbated by a relatively low level of household comfort with emergency cash buffers and more generally, current savings and investments.
“The Report also identified the number of households struggling to save each month increased 2% to 51% in the past six months, while 46% have less than $5000 in savings for an emergency. Only 26% are building up ‘rainy day’ savings, 11% are spending more than they earn and 5% are using equity in their own home to make ends meet month to month,” McPhee added.
Households are still relatively cautious when it comes to their finances and, in particular, are avoiding risks with their investments, with overall risk-avoiders outnumbering risk-takers 37% to 18%. Self-funded retirees had the highest number of risk-takers to risk-avoiders (32% to 19%, with 45% neutral), compared to Gen Y (21% to 37%) and Gen X (21% to 33%), Baby Boomers (17% to 37%) and government-funded retirees (10% to 58%).
In another sign of caution, of those households with savings, 34% continue to pay off their debts as fast as they can.
“Notwithstanding low interest rates and rising share prices and to a lesser extent rising house prices, the findings support the case for the RBA to continue to ‘wait and see’ on official cash rates, as it looks for increased household spending and investment as the economy as a whole passes the peak in the mining investment boom,” McPhee said.
Overall, household financial comfort was 5.52 out of 10 in December 2013, a moderate level of comfort and largely unchanged in the past six months, although at its highest level since the Index was established in October 2011.
“In terms of households, significant rises in financial comfort among retirees (up 5% to 5.4 out of 10), especially self-funded retirees (to 7.2), as well as couples with older children (up 6% to 5.7), were offset by a sharp fall in financial comfort among single parents (down 5% to 4.7), notably single parents dependent on government payments (to 3.4)”, McPhee said.
“While retirees and couples with older children are benefitting from rising equity and to a lesser extent housing markets, single parent households are concerned by the announcement to tighten government assistance and parenting payments from 1 January 2014.
“At a state level, there are also disparate and rebalancing trends, with household financial comfort down significantly in the mining and energy resource intensive states, including Western Australia (to 5.7 out of 10), Queensland (5.2), and Northern Territory (4.4) as well as South Australia (5.2), while comfort has improved in New South Wales (5.7) and Victoria (5.6).”
Other key findings:
Areas of lowest overall household financial comfort
Household financial comfort across states
Household financial comfort across labour force
Monthly expenses and budgeting
Retirement and superannuation
Managing a financial emergency
About the Report
The ME Bank Household Financial Comfort Report provides in-depth and critical insights into the financial situation of Australians based on a survey of more than 1,500 households. The survey is conducted biannually.