Is the bank of mum and dad in trouble?

Are parents obliged to help their children buy their first home? It seems 25 per cent of Australians believe they are.

Canstar’s fourth annual Consumer Pulse Report reveals that a third of millennials (aged 26 to 40) and 22 per cent of gen Z (aged 41 to 55) believe such support is to be expected, but only 14 per cent of baby boomers (aged 56 to 74 years) agree.

“You’ll find that parents don’t believe they have an obligation, but they have a capacity so will help anyway. It’s more, yes, I don’t owe you that as one of my offspring but I’m happy to do it,” said Canstar’s group executive of financial services, Steve Mickenbecker.

Assistance may be required if more people are to enter the property market, according to the survey, which shows 36 per cent of Australians expect house prices to grow at a steady pace in the next two years and a further 8 per cent predict prices will ‘skyrocket’.

“With so many people predicting property prices will continue to rise and one of the biggest financial concerns being the cost of rent, it’s little surprise that Australia agrees the appropriate age for adult children to remain living at home is age 33. The only group to suggest the stay should be longer is those currently living at home who said the age limit should be 43. Hopefully, this is to give themselves more years to save,” said Mr Mickenbecker.

He says Australians are in “survival mode” due to the coronavirus recession.

“Current financial concerns highlight peoples’ focus on sticking to the basics of putting food on the table and keeping a steady job in the year ahead.”

The main financial concern of those surveyed were the cost of groceries (12 per cent compared with 10 per cent in 2019) and the fear about job security (12 per cent vs 10 per cent in 2019). Concern about the cost of electricity and gas was down from the biggest concern to the third most prominent worry (9 per cent vs 14 per cent in 2019).

“This is the first time in four years that the cost of electricity and gas has moved from the number one financial concern for Australian households. Concerns around paying for groceries and job security have risen in the ranks this year in response to the devastating effects of the pandemic.” 

The reduced concern about utility bills comes despite Australia’s energy debt rising sharply.

The Australian Energy Regulator (AER) Annual Retail Markets Report 2019–20 shows a sharp rise in energy debt since March this year, with debt owed by small businesses growing from $35 million in March 2020 to $45 million in June 2020.

“This report really underscores the struggle it has been for many customers to get on top of their energy bills during the pandemic,” said AER chair Ms Clare Savage.

Measures taken to ensure customers were not disconnected have had a big impact, with 29 per cent fewer complaints to energy retailers from customers and 26 per cent fewer complaints to ombudsmen from customers since 2018–19.

Ms Savage told ABC radio that electricity and gas bills were usually the first pain points in tough times. She says the industry reacted well to the huge number of Australians forced to work from home during pandemic lockdown.

“We can’t have them at home without power …”

She said customers would only be disconnected in “limited circumstances” when they have not attempted to contact their supplier. More than 60,000 Australians took advantage of bill deferrals during lockdown.

Canstar’s take is a little different: “Households are now also seeing the benefits of recent market reform in the shape of lower bills made possible by intense price competition and favourable wholesale conditions.”

Ms Savage is concerned about the scheduled reduction of coronavirus payments such as JobSeeker in March, saying they would have a significant impact on energy customers.

Other key findings from the Canstar Consumer Pulse Report:

  • 50 per cent of Australians working from home during the pandemic have managed to save money.
  • 35 per cent of Australian women feel they are not living within their financial means or don’t know if they are, compared to 20 per cent of men.
  • 30 per cent of Australians have accessed their savings to cope in 2020.
  • 47 per cent of savers keep the bulk of their money in a savings account despite interest rates falling this year on average by 0.58 per cent.
  • saving for living costs such as groceries and electricity has overtaken holidays as the main expense people are saving for.
  • For the 28 per cent of Australians who have debt excluding a property loan, the average debt amounts to $30,188 per person, down 38 per cent year on year.
  • 46 per cent of Australians with debt excluding a property loan admit to missing repayments.
  • 47 per cent of Australians would consider using buy now, pay later services such as Afterpay and Zip Pay.

How well do you feel you have managed the financial stresses of 2020? Do you believe it will still be a tough road ahead? Have energy costs been a pressure point?

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Related articles:
https://www.yourlifechoices.com.au/finance/property/social-housing-push-unites-foes
https://www.yourlifechoices.com.au/finance/superannuation/best-longterm-investment
https://www.yourlifechoices.com.au/finance/banking-and-investment/where-to-invest-for-the-grandkids

Written by Will Brodie

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