Household Financial Confidence Higher as Rates Fall

We release the October edition of the Digital Finance Analytics Household Finance Confidence Index (FCI) today. Overall average confidence is up again, as a direct response to the RBA rate cut, and property owning households are the more confident. The index reached 98.2, up from 97.1 last month, and is trending towards the long term neutral setting. Property Investors and Households with Owner Occupied property continue to move above the neutral setting, thanks to continued capital appreciation (in most centres) and lower mortgage rates and some rises in term deposit rates.  Those without property interests drag the average down, highlighting again how important property is to household finances.

fci-oct-16On a state basis, NSW and VIC are most positive. WA the least positive, reflecting falls in home prices, rising rental vacancies and less appetite for property.

fci-oct-16-states Household income, in real terms remain in the doldrums, putting more pressure on those with larger mortgages.

fci-oct-16-incomeBy way of background, these results are derived from our household surveys, averaged across Australia. We have 26,000 households in our sample at any one time. We include detailed questions covering various aspects of a household’s financial footprint. The index measures how households are feeling about their financial health. To calculate the index we ask questions which cover a number of different dimensions. We start by asking households how confident they are feeling about their job security, whether their real income has risen or fallen in the past year, their view on their costs of living over the same period, whether they have increased their loans and other outstanding debts including credit cards and whether they are saving more than last year. Finally we ask about their overall change in net worth over the past 12 months – by net worth we mean net assets less outstanding debts.

Author: Martin North

Martin North is the Principal of Digital Finance Analytics

One thought on “Household Financial Confidence Higher as Rates Fall”

Leave a Reply