About one quarter of Australian households have less than $1000 in cash savings, a new report has found.
And they are less capable of raising funds for an emergency than at any time in the past seven years.
The Household Financial Comfort Report says that more Australians are strapped for cash and are being forced to dip into their savings to cover rising living costs created by stagnant incomes.
Feeling the brunt were ‘empty nesters’ – those aged 50 and over – who reported a record low in their level of financial comfort.
Jeff Oughton, consulting economist for ME Bank which commissions the biannual survey of 1500 households, said more Australians were plundering savings to cover essential living expenses.
“You may think that empty nesters would have fewer financial worries – most have paid off their mortgage, their kids have flown the coop, the majority are still working and some have voluntarily retired,” he said. “However, many are still concerned about current finances as well as worried about their life after work, expressing an eight per cent drop in comfort with their expected standard of living for retirement, as well as a seven per cent fall in their ‘comfort with savings’.”
The report showed that the confidence of households to raise money for an emergency dropped three points below the average since the survey began in 2011, and fewer households reported that they were able to save.
The AIA Healthy Living Index 2018 released last month also showed that Australians were concerned about their ability to meet the potential costs of critical illness.
That survey found Australians faced a considerable ‘financing gap’ where savings, current levels of insurance and government health provisions might not be enough to pay for the treatment of critical illnesses such as cancer, heart disease and diabetes.
The Household Financial Comfort Report found that more Australians were overspending and that some feared their savings would be depleted.
“Currently, around a quarter of Australian households have less than $1000 in cash savings,” Mr Oughton said.
“If we see big negative shocks in the coming year, whether they are higher loan rates or an international trade war, then a lot more families will suffer increased financial stress.”
The latest report found that the cost of necessities continued to be the major concern, with more than half the household reporting it as their “biggest financial worry”, up seven points to 53 per cent. Similarly, when asked why their financial situation worsened during 2017–18, 44 per cent said it was due to the cost of everyday items.
Of households with debt, there was an increase in the number who were expecting they “will not be able to meet their required minimum payments on their debt” and “can just manage to make minimum payments on their debt” in the next six to 12 months – 43 per cent combined compared to 38 per cent in December 2017.
Mortgage and rental stress was high, but there was better news for renters.
“The good news for renters is that financial stress has lessened somewhat during the past six months, thanks to the housing market cooling and rents falling. While almost three quarters (72%) of renters were previously contributing over 30% of their disposable income towards rent, this number dropped significantly to two thirds (67%) in the most recent survey,” Mr Oughton said.