The financial fallout from the COVID-19 pandemic will cause lifelong damage for some Australians and those in older age groups have suffered much more than younger generations, according to a report released on Tuesday.
The Brotherhood of St. Laurence’s Shocks and Safety Nets report found that the financial wellbeing gap between older and younger people diminished during the COVID period, but that was mostly as a result of older Australians losing some of their financial advantage.
The report examined the financial impact of the pandemic and found that financial wellbeing scores for all people aged 45 and over declined by 8 per cent and they also experienced the most marked decline in those who reported ‘feeling comfortable’, which fell 15 per cent.
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According to the report, declines in income or savings for those nearing retirement will have a larger impact on their long-term economic security, which was reflected in the large decline in those who reported ‘feeling comfortable’.
Many people aged over 45, disability pension recipients and women on low incomes reported being left with dwindling financial buffers after accessing savings and superannuation, and increasing debt during the pandemic, the study found.
The report’s lead author, Dr Emily Porter, said that for many the financial disadvantage they suffered during the pandemic was likely to be locked in for a lifetime.
“Opportunities to recoup these losses are likely to be limited, with the recent Federal Budget predicting continued low wage growth and a continued shift to part-time work,” Dr Porter explained.
She said that ‘COVID normal’ for many Australians would mean even greater financial vulnerability in an uncertain world.
“The impacts of the crisis were uneven. This is just one of the many crises that we’ll face and the most disadvantaged will be hard hit. Put simply, those with less are not likely to bounce back,” Dr Porter said.
“Our study really highlights the importance of decent work that allows people to build savings in the event of future crises and having a fair and adequate social security system in place. We need both to support people through uncertain times.”
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The report showed that temporary policies such as the coronavirus supplement did moderate the effects of the crisis, but they were short term.
Those who had access to the increased income support payments reported an improved ability to meet financial commitments for the COVID period.
Yet many during this time still had to draw on their savings or access their superannuation, leaving them in a more precarious situation.
The report said that many older Australians saw their financial security eroded during the pandemic. Unemployment for over 55s increased from 3.6 per cent in January 2020 (before the pandemic) to 5.2 per cent by August 2020, while many more faced underemployment or reduced hours.
At the same time, the global downturn hit financial markets, which resulted in some older Australians seeing their retirement savings shrink.
The increasing uncertainly also saw workforce participation (those actively working or looking for work) among over 55s increasing while participation among other groups declined.
According to the report, those aged 45-64 and those aged 65 and over also suffered a 6 per cent decline in their financial resilience.
“These declines in resilience come from a high base, suggesting older people had more to lose from a crisis,” the report stated.
How did the pandemic affect your financial wellbeing? Are you feeling less financially comfortable than before the pandemic?
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