Australians feeling worse about wealth, spending their entire income

Australian households are overall feeling worse about their net wealth, jobs, income and living expenses, according to new research, not helped by the significant property price falls over the last six months and a weakening labour market.

Despite lower mortgage rates, cuts to personal income tax and higher local and global equity prices, the financial comfort of Australians has eased – there was a significant fall in comfort with wealth.

The research showed that about 40% of households continue to spend all their monthly income.

Commenting on ME’s Household Financial Comfort Report, consulting economist Jeff Oughton said the comfort with wealth would have fallen a lot more if it weren’t for record bond prices and rebounding share markets as well as the government’s retention of negative gearing on investment properties.

Financial comfort with investments (in financial assets, such as shares and super, and property) was the only driver across the index to improve - up 1% - but was largely accrued by households with high incomes.

Households with incomes of $200k+ per annum and large superannuation balances (above $1 million) reported increases to overall financial comfort by 10% to 7.45 and 11% to 8.3, respectively, during the six months to June 2019.

Households’ comfort with their incomes fell by 1% - only 36% of Australian households reported an increase in their annual income during 2018/19.

Interestingly, higher income households are more likely to report an increase in income during the past year.

The report also showed an increasing concern around job availability and underemployment. The number of workers who felt it would be difficult to find a new job increased by 16% - the highest recorded since 2016. Twenty-six percent of all workers said they felt insecure in their job.

In net terms of the greatest financial ‘worries’ and ‘positives’, cost of necessities was the most commonly cited worry in ME’s latest report, nominated by 44% of households. This was followed by worries about level of cash savings on hand (34%), ability to maintain lifestyle in retirement (31%) and impact of legislative change (19%).

Oughton said, “Since the latest Federal Budget was announced, households, on average, have slightly increased their precautionary savings. However, this saving behaviour was predominantly among those with a smaller amount of cash savings, and in contrast, those 10% of households reportedly spending more than their monthly income are overspending by more each month (up 18% in dollar terms).”