Financial Stress is Increasing in Australia as Cost of Living Pressures Mount

After the ME Bank Survey, and our Household Finance Confidence Index both showed the financial pain many households are in; now National Australia Bank’s (NAB) latest Consumer Behaviour Survey, shows the degree of anxiety being caused by not only cost of living pressures but also health, job security, retirement funding as well as Australian politics.

From NAB and Business Insider.

Of all the things bothering Australian households in early 2018, nothing surpasses cost of living pressures.

From the National Australia Bank’s (NAB) latest Consumer Behaviour Survey, it shows the degree of anxiety being caused by not only cost of living pressures but also health, job security, retirement funding as well as Australian politics.

The higher the reading, the more anxious it is making Australians.

Somewhat surprisingly, it was not the gaggle in Canberra that caused the most anxiety for households in the latest survey, but rather persistent concerns surrounding living expenses.

“[The index] was basically unchanged in Q4 2017 at near survey lows with job security causing Australians the least stress, consistent with a strongly improving labour market,” said Alan Oster, NAB Group Chief Economist.

“That said, the cost of living is still weighing most heavily on them, highlighting the disconnect between low levels of economy-wide inflation and consumer focused costs.”

That was reflected in the detail of the latest survey, revealing some alarming statistics as to just how many Australians are struggling at present.

It found around two in five Australians suffered some form of financial hardship over the survey period, especially among lower-income earners.

Over 50% of low income earners reported some form of hardship, with almost one in two 18 to 49-year-olds being effected.

As seen in the chart below, after a steady improvement in late 2016 and early 2017, those reporting financial hardship have increased in recent quarters, coinciding with steep increases in gas and electricity charges for many Australian households.

“Being unable to pay a bill was the most common cause,” the NAB said, adding this came in at over 20%.

“Not having enough for food and basic necessities was next, impacting one in three low income earners.”

Some 18% of respondents reported not having enough for food and basic necessities in the latest survey.

Nearly half of those consumers also reported they were “extremely” concerned about their current financial position, nominating paying their utility bills as the biggest impact on their financial position.

“While consumers told us they were a little less concerned about their household’s current financial position in Q4, being unable to pay a bill — particularly utilities — continues to have by far the biggest impact on those households most concerned about their finances,” Oster said.

With cost of living pressures still creating anxiety among households, the NAB asked respondents how much extra income they would need to alleviate those concerns.

In short, a lot, especially for those in the big capital cities and households with children.

“On average, consumers told us they need an extra $207 a week – or $10,764 per year,” Oster said, adding that “this varied according to where we live, our income, gender and family status”.

“It ranged from $221 in New South Wales and the ACT to $132 in Tasmania, and from $214 in capital cities to $186 in rural areas.

“Consumers with children need $258 and those without $191”.

 

While Oster admits that how consumers “feel” doesn’t necessarily correlate with how they really spend, it underlines the point that many Australians think they’re getting squeezed financially.

If it wasn’t already apparent, this likely ensure the next federal election campaign will be centred around alleviating the perceived cost of living pressures facing many Australian households.