The reason many Australians are tightening their belts

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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?

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Written by Ben

83 Comments

Total Comments: 83
  1. 0
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    Tightening the belt. For the first time in years I worry about paying for the groceries. I have to consider going to the doctor. My safe permanent position is now a casual one. I do not get sick leave or paid rec leave. This article does not do justice to many people’s lives. Perhaps the hard questions were not asked and perhaps the people questioned do not get asked the reality

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      Absolutely agree, one’s wonder how they do their research? Asking the privileged?

    • 0
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      YES!
      ‘This article does not do justice to many people’s lives. Perhaps the hard questions were not asked and perhaps the people questioned do not get asked the reality ‘ – fully agree with it.
      Most people I know are tightening the belt because of the increase in living cost, increased bills and council rates…etc.
      Many of my friends are sadder and suffer from depression.
      The world is turning upside down.
      The managers of our country are only following instructions of their New World Order bosses.
      They simply fill in their own pockets and don’t give a damn about a common person.

      In fact, IT IS GETTING WORSE.

      Stop peddling false propaganda !

    • 0
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      Concerned… I am sorry to hear your job has become casual with all its insecurities. That would be the reason many Australians are tightening their belts too. Too many casually employed. Others get paid less for doing more as the cost of living rises each week. Corrupt politicians and corporations are making life harder for Australian. No wonder we are tightening our belts.

    • 0
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      Concerned…you are lucky, you have any type of job. I am now fully on OAP after being shafted from govt contract job for younger version (who by coincidence, was related to a senior manager). I have very small super and even owning my own small house, daily costs are getting out of hand. I need health insurance, then other insurances, rates (yeah god’s, that is the rip of all time!). I don’t eat meat, try to limit car trips, and scrimp and save as much as I can. But daily living costs are just growing. Couldn’t do Uber as car too old, hard to find any small ways to earn an extra $. Have lost count of the number of businesses I have contacted seeking any type of work. I can’t downsize (not interested in living in a caravan), and I really do despair about the coming years.

    • 0
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      This is just a general study with not much relevance to the Retirees / Pre-Retirees on YLC.

      Since the Jan 2017 Assets Test change for OAP, belt tightening has obviously been widespread amongst Retirees who receive less income since then, and also by other Retirees in anticipation of further such Govt attacks on income in the future.

    • 0
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      How can one section tightening their belts be an indication of narrowing the gap? That’s comparing two different areas. The least wealthy section loosening their belts would be narrowing the gap.
      Maybe we all should write to this bloke, asking him the questions and telling him where he is wrong. Then write to the papers.

    • 0
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      sunnyOz…A fiend of mine does Uber and rents a lovely car from them. You can do Uber have a look into it.

    • 0
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      It narrows the gap below your ribcage…..

  2. 0
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    I had a great Christmas with my free ham, free booze, free turkey and free Christmas hamper. It actually saved my money on my groceries.

  3. 0
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    I had a great Christmas with my free ham, free booze, free turkey and free Christmas hamper. It actually saved my money on my groceries.

    • 0
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      Well bully for you. Most people would have declined the ‘gifts’ and asked them to be given to someone who needed them, not someone who boasts about his $400,000 play dough. No wonder the world is in a mess.

    • 0
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      Well bully for you. Most people would have declined the ‘gifts’ and asked them to be given to someone who needed them, not someone who boasts about his $400,000 play dough. No wonder the world is in a mess.

    • 0
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      OG that repeat posting is getting old very fast. The fact that you’ve been crowing how comfortably off you are and then grabbing all the freebies doesn’t look good but at least you can never tell pensioners that “however much they get it’s never enough “ ever again.

  4. 0
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    Seriously we live in uncertain times where everyone is tightening their belts as even junk shops are struggling to survive.

    I have also been telling sales assistants when they try to sell me stuff that I’ll have to wait until after the election to see if I have enough money to live let alone buy extra stuff after Labor takes 30% of my income away. It’s a great way to explain what’s really happening.

    • 0
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      Franking credits having paid zero in tax? If so, you deserve to lose it.

    • 0
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      I explained that the LNP took away my expected income and as I couldn’t change anything I planned on and I would have to mow my own lawn and clean my own house. The Lawnmower man said a few customers had been hit and he was sorry.

      And yes spending was cut with that budget austerity and the penalty rate income cuts.

      I told everyone I could about the bastardly too.

      If Labor do it remember the LNP started it.

      The Franking credit cuts will further the decline in spending. Didn’t politicians see what happened in Greece?

    • 0
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      They don’t get franking credits in Greece lol. Only Aus does this. Labor invented it and Libs extorted.
      Greece mismanaged and overspent.
      OG, I don’t think you are always consistent in what you say lol.

    • 0
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      Yes Paddington it is a silly idea. Companies should not be paying tax for shareholders at all. They should pay their due tax and then allocate dividends from profit. The whole franking credit idea should be made redundant.
      A lot of the greed we saw in the banking system and the overpricing of shares is a result of this tax policy.
      Yes Greece mismanaged and overspent and the debt finally overwhelmed them.
      I was in Athens the night the GFC exploded into awareness and it was damn scary.
      Five years later the poverty seen was extraordinary.

      Australia has mismanaged and overspent as well. Debt levels are higher than ever before and households are struggling. $4 trillion will have to be paid back. Bad enough without Government choosing favourites and punishing savers.

      The decline in spending from austerity for this group, then that group , then the next group, cutting incomes here and there for the bottom 80% is going to cause spending to decline. It must.

      Anyone not saving extra just in case is foolish.

  5. 0
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    I am at a loss to understand what this article is all about. It says that more people are saving and fewer people are overspending and the reasons for this are many and various. One economist says it could be to build financial resiliency yet it could also be that falling property prices could mean that people have increased saving for a deposit.

    Property prices only matter if one is buying or selling, if neither action is contemplated then the statistics don’t mean an awful lot. Incidentally, if a sale and purchase is made on the same market, there are no winners and losers because inflation or deflation applies to both properties.

  6. 0
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    Life is too short for those in retirement to just save save, and save !!

    We cannot even live in dignity !

    • 0
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      Possibly because you didn’t save at all. Saving just 10% of income as a buffer means you can live in dignity. Spending everything or more is the problem and saving the solution.

  7. 0
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    When the sales assistants enquires why I’m not spending more I tell them. The LNP lied and broke an election promise with the changes to the 2017 Pensioner Assets Test and stole my pension assets.

    • 0
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      Well Labor now wants 30% of the income your have left too.

    • 0
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      Yes because they saw how well in worked for the LNP. We should have rioted.

    • 0
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      I remember you thought it was a great idea to cut retirees incomes last time OG. It’s a different matter when it affects you though.

    • 0
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      Rae I keep my franking credits under Labor. However that doesn’t stop me from campaigning against this unfair proposed policy. That cut to the asset test was fair. However it is not fair that Labor will give back $34 billion in franking credit to high income earners but steal $5 billion in franking credits from low income earners.

    • 0
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      Agree, Mad as Hell and Rae. Usual crap from OG. LNP’s attack on Part-Pensioners left them nowhere to go except to suffer massive income loss. Franking Credits issue is also bad, but can firstly, still be tweaked (say with a Cap on Refunds or Set-offs, or simply applied to all Franking not just refunds then OG can’t complain), and secondly, those using such financial arrangements would be able to re-arrange their assets and escape the effects. Not desirable, but the Assets Test change was infinitely worse, with no options and was also a major Broken Promise from Abbott. Liberals MUST pay for that.

    • 0
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      It would be better if companies just paid the taxes due and then issue dividends from after tax profits. Why companies are paying tax on behalf of shareholders is the issue. Other countries don’t need to do this.

  8. 0
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    We’re tightening our belts necessarily because of the gross mismanagement of the LNP government.

    • 0
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      Good luck then as the alternative government will only make things much worse for you.

    • 0
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      Liberal & Labor both mismanage and attack retirees, hence both need to be turfed out. They are a Tag Team, one launches one attack, then the other launches the next one. Both use Greens help too, shows all 3 must go!

  9. 0
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    Prices up wages down how can it be any other way.This Federal Gov. has pushed down wages so much the system can’t work any more, not very smart.

    • 0
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      It’s falling over now. I just hope it goes pear shaped before May. It was the oddest time in the US when it happened there. Spending just stopped dead. Wallets slammed shut and it was only weeks until businesses were shutting up shop. Still they brought it on themselves.
      Putting rich and spoilt brats in charge isn’t such a great idea. We know they bully, are greedy and won’t share and are generally stupid to boot.

    • 0
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      floss wages are going up. Wages Growth running at about 2.3% in the private sector and 2.5% in the public sector. Prices are actually coming down. Unemployment is at an all time low of 5%. There’s a lot to be happy about.

  10. 0
    0

    I measure my financial comfort by the value of the A$ as I spend around 3-4 months a year in Asia. I noticed that my costs to do so have increased by around 10%, which is roughly the drop in our dollar vs. SE Asian currencies. It’s not a good sign for our economy, means that we will become a cheap destination for Asians soon whilst we can’t afford to travel there anymore. Still a way off though, but the trend is worrying. For example 5 years ago in Vietnam I would get around 22,000 dong to the dollar, now it’s around 16,000! So yes, I’m definitely reigning in my spending.

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