Australia’s financial comfort gap has narrowed for the first time in seven years, with most households feeling better about their finances despite significant falls in residential property and share markets.
Income gains, easing living costs, increased cash savings and reduced overspending were key drivers in households’ rising financial comfort, but despite this, many cautious Australians were still trying to rein in their spending.
ME Bank’s bi-annual Household Financial Comfort Report released in February, showed more households were saving and fewer overspending.
The number of households saving each month increased to 51 per cent in the past six months – its equal highest level since the survey began seven years ago – with the estimated average amount savers are putting away increasing seven per cent to $862 per month.
Meanwhile, the estimated average amount over-spenders drew-down on savings or credit each month decreased 28 per cent to $453 per month.
ME Bank economist Jeff Oughton said increased belt-tightening may be a consequence of sustained property falls as well as economic and political uncertainty.
“We’re still seeing some geopolitical effects, with households concerned about the world economy up … to 29 per cent, and combined with domestic property and share market corrections, many Australians are beginning to tighten their belts to build financial resiliency,” Mr Oughton said.
Increased savings have flowed through to greater financial resilience with an improvement in households’ ability to handle a financial emergency (up one percent to 4.83, the second highest level since the report began).
In the seven years ME Bank has conducted the bi-annual survey, the financial comfort between property owners has diverged from renters. This is the first survey where the comfort between these cohorts narrowed.
“The comfort gap between property owners and renters, as well as between very high-income earners and other income brackets, has narrowed,” Mr Oughton explained.
“We’ve seen a correction for wealthier, older property-owning Australians who have 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.
“Together the changes have helped to narrow the big gap in financial comfort that had been widening.
“Cooling housing and share markets haven’t yet dented the financial outlook of most Australian households, and many residential property owners remain positive: only 13 per cent of home owners and 11 per cent of investors expect the value of their properties to fall in 2019.”
How would you rate your own financial comfort? Have you been trying to cut back on your own spending this year? What have been the main reasons for this?