Australia’s overall financial comfort may be improving, but that doesn’t mean Aussies are ready to give up on stashing money away like doomsday is just around the corner.
ME Bank’s latest Household Financial Comfort Report (HFCR), has just been released, finding that household financial comfort is generally improving and Aussies are comfortable about their ‘ability to pay regular expenses’. But at the same time, the cost of necessities remains their ‘biggest worry’ when it comes to household finances.
According to Mozo Data Manager, Peter Marshall that’s a picture of the Aussie economy in a nutshell.
“Although right now things are looking quite good on paper, people are concerned about the possibility of a less rosey future,” he said.
Renters coming out on top of the HFCR
The HFCR report revealed that for some Aussie households things are looking up. Overall, the Household Financial Comfort Index has increased, reaching the highest it’s been in the past five surveys, up 2% to 5.56 out of 10
In particularly good news for renters, their financial comfort is at the highest its been in 4 years, up 8% to 4.78 out of 10.
Comfort gap between property and renters closing
However, while financial comfort is improving for renters, it’s not looking so great for homeowners. Households who own a home mortgage-free fell 3% to 6.27% out of 10, the lowest since the ME bank survey began.
“The comfort gap between property owners and renters, as well as between very high-income earners and other income brackets, has narrowed,” said Jeff Oughton, ME’s Consulting Economist.
“We’ve seen a correction for wealthier, older property-owning Australians who’ve been riding the hot property and bull share markets for much of the past seven years, while middle and lower-income households have begun to benefit from an easing in living cost pressures and income gains.”
The effect of financial resilience on the future
The report found the key drivers in households’ rising financial comfort to be income gains, easing living costs, increased cash savings and reduced overspending.
Even as things look up, more Aussies are putting effort into building up a savings buffer for a future that might not be as cushy.
The number of households saving each month increased 3 points to 51% in the past six months – its equal highest level since the survey began, with the estimated average amount savers are putting away increasing 7% to $862 per month.
However, Oughton said that if Aussies continue on this trend of tightening their belts it could have a worse effect on the Australian economy in the long run.
“If above average cash savings and reduced spending behaviour continues during 2019 it could significantly slow economic growth and in turn may lead to smaller job and income gains,” he said.
But according to Marshall, the nature of the housing market generally could be making Aussies feel uneasy, and he expects to see Aussies being even more careful with their money in months to come.
“Homeowners are concerned that there’s no sign the declining housing market slowing, therefore reigning in their spending. With property value falling and persistently low levels of wages growth, it seems a large number of Australians are worried about the security of their financial future and planning for what might come.”
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