Social Trends – Page 155 – Digital Finance Analytics (DFA) Blog

Savers And “Lower For Longer”

The ultra-low interest rates are hitting savers hard. Stephen S. Poloz, Governor, Bank of Canada spoke on this in his speech “Living with Lower for Longer“. He says that low rates do hit savers, at a time when life expectancy has risen, and the only silver lining is that asset prices are inflated by the same low rates; cold comfort indeed.

One group that has certainly been affected by lower for longer is savers, particularly seniors who planned to finance their retirement with interest income generated by a life of working hard to build savings. I have heard from many Canadians who are rightly worried about their ability to live off their savings and who are seeking a return to higher interest rates.

I certainly can sympathize and understand these concerns. Demographic and economic changes, along with the low interest rates that followed the financial crisis, have upended the calculations that many Canadians made in planning for retirement. That is not their fault.

But at the heart of this discussion is the level of the real rate of interest. Having higher nominal interest rates because of higher inflation would not help savers, because higher inflation would just erode the future purchasing power of those savings. Maintaining a low-inflation environment is the Bank’s primary goal. We do this because we’ve seen that it is the best way to help bring about solid, sustainable economic growth. That growth benefits everyone, from business owners looking to expand, to workers looking for employment, to savers looking to protect their savings and find investment opportunities.

In our most recent Monetary Policy Report, in July, we said that our current policy rate setting of 0.5 per cent was consistent with the economy returning to full capacity toward the end of 2017 and inflation returning sustainably to its target. We’ll update our forecast next month, but in our decision on September 7, we indicated that the risks to our projected inflation profile have tilted somewhat to the downside following recent data on investment in both the United States and Canada, and the recent data on our exports. It is quite evident that our economy is still facing strong headwinds, and we need stimulative monetary policy to counteract them and move us closer to full capacity. We also need to watch the full effects of the government’s fiscal stimulus unfold.

However, the decline in the real neutral rate means that any given setting of our policy rate will be less stimulative today than it was a decade or two ago. The current policy rate, while certainly providing monetary stimulus, is not as stimulative as it would have been before the crisis.

By the same token, an immediate rise in our policy rate back to, for example, the 4.25 per cent that prevailed before the financial crisis would represent an extreme tightening of policy and would have significant consequences. This is just another way of saying that low interest rates are actually having big effects today, but the headwinds pushing back on that stimulus remain quite powerful.

For some savers, ultra-low interest rates do have positive effects. In particular, the value of most assets rises when interest rates decline, supporting gains in household wealth. This effect may not be as obvious as the impact of low rates on savings. But lower interest rates generally mean higher stock and bond prices, as well as increases in the value of real estate, which has been another important source of wealth for many savers, particularly seniors.

I realize this may be cold comfort to those people who have to adjust retirement plans to a lower-for-longer world. But the difficult reality is that savers must adjust their plans. That may mean some combination of putting aside more funds, working a little longer than planned or changing the mix of investments. There are no easy answers, particularly for some who have already retired.

Compounding the challenge is the fact that people are now living longer—life expectancy has risen by about 6 years since the early 1980s. I hope you will agree that this is unambiguously good news. But combining longer life expectancy with low interest rates means that a person starting to save today would have to set aside much more to generate the same retirement income as a person who began saving 25 years ago, if both wished to retire at the same age.

How Airbnb is reshaping our cities

From The Conversation.

Infrastructure in our cities – let’s call it the hardware – remains much the same as ever, but the software – the way we use it – is transforming rapidly. One piece of that software, Airbnb, is dramatically reshaping the world’s cities.

The digital platform allows citizens to find and rent short-term accommodation from other citizens. Airbnb has the potential to rupture the traditional spatial relationship between tourist and local, making our cities more vibrant and diverse places to live in and to visit.

The question is: what opportunities and dangers does the platform present? What are the implications of repurposing existing residential infrastructure for short-term accommodation? What happens when the global “sharing economy” meets a city’s suburbs?

Lessons from an early adopter

Melbourne was an early adopter of Airbnb. It is also one of the top 10 cities for global travellers on Airbnb. What insights can be gathered from its experience?

According to Airbnb, three-quarters of listings worldwide are outside major hotel districts. Airbnb has three types of property listings: entire homes, private rooms and shared rooms.
Concentration of Airbnb entire-house rentals in Melbourne. Jacqui Alexander & Tom Morgan, Author provided
Entire homes make up over half the total number of Melbourne’s metropolitan listings. Data collected in January 2016 reveals that their distribution is relatively consistent with that of hotels and licensed accommodation, which exist in large concentrations in the CBD and inner city. Many hosts who list entire homes lease or sublet when they go away.

In Australia, tenants require permission from their landlord to sublet, so there is little risk for the landlord if they follow due process. But analysis by website Inside Airbnb indicates that about 75% of entire-house listings in Melbourne are available for over 90 days per year. Hosts with multiple properties manage about a third of all the entire-house listings in Melbourne. These operators hold an average of three properties, but some have dozens. Through Airbnb, these brokers are turning existing housing infrastructure into informal, distributed hotels while saving on capital costs, overheads and wages.

Globally, the Airbnb phenomenon has been blamed for driving up rents, accelerating gentrification and displacing local residents by reducing available housing stock. In Melbourne, the boom in high-density development in the CBD has resulted in an excess of homogeneous apartment dwellings. Bedrooms without natural light, as well as insufficient floor area, outdoor space and storage space, characterise many of these developments, rendering them effectively unlivable for long-term residents. But these properties are attractive to itinerant tenants seeking affordable inner city accommodation.
Concentration of Airbnb shared-room rentals in Melbourne. Jacqui Alexander & Tom Morgan, Author provided
Shared rooms in Melbourne constitute only about 2% of all listings, but they are almost exclusively confined to the CBD. Box Hill (14 kilometres east of Melbourne), and Maidstone/ Braybrook (eight kilometres west of Melbourne) are secondary outlying hotspots. The majority of CBD listings are around new apartment towers near Southern Cross Station (at the western end of the CBD) and RMIT University.A number of already small two-bedroom apartments in the Neo200, Upper West Side and QV1 towers are operating as gendered dormitories. These often sleep eight, with four to a room. Overloading these apartments creates potential fire-safety and hygiene-compliance issues.

Short-term letting via sites like Airbnb allows investors to earn up to three times the amount they’d receive in rent (the average cost to rent an entire home is AU$189 per night). Travellers benefit from competitive accommodation rates, cooking facilities, convenient locations and access to private pools and gymnasiums intended for residents.

Airbnb acknowledges that professional hosts with multiple listings are exploiting the so-called sharing economy, but has not yet taken steps to regulate this. Governments would do well to implement the long-awaited and much-needed minimum design standards for apartments to curb the construction of developments in the city that fail to cater for residents or which are purpose-built for the Airbnb market (a few local examples are already emerging).

Beyond the obvious need to protect the amenity of citizens, protection of the liveliness and heterogeneity of the city is essential to maintain the kind of “authentic” experience that appeals to Airbnb users in the first place. Melbourne is beginning to follow the trajectory of international cities like London where the investor market, fuelled by capital gains tax exemptions, has pushed residents further and further out. Dispersing the concentration of entire-house and private-room rental is vital.
Concentration of Airbnb private room rentals in Melbourne. Jacqui Alexander & Tom Morgan, Author provided
More promising is the dispersed pattern of private rooms in Melbourne. These represent around 45% of listings across the city. While private rooms are still concentrated in and around the CBD, diffuse listings across Melbourne’s middle-ring suburbs realise Airbnb’s ambition to enable access to the everyday spaces of cities. This pattern makes sense given the mismatch between Australian house sizes, which remain the largest in the world, and changing household structures – most significantly, the decline of the nuclear family. An increase in housing diversity in the middle-ring suburbs is likely to facilitate more entire-house listings in these areas in the future.

We are also seeing evidence of Airbnb driving housing diversity. Annexed and granny-flat configurations are commonly listed in suburbs close to the Melbourne CBD like Brunswick and Caulfield. Loose-fit arrangements like these provide more flexibility to cater to both residents and visitors, and the by-product is slow but genuine “bottom-up” densification.

Government incentives for this kind of small-scale development would help to make this a viable (and, for many, welcome) alternative to densification through high-rise apartment development.

In 2015, Tourism Victoria entered into an agreement with Airbnb Melbourne to promote buzzing inner-city suburbs Fitzroy and St Kilda as “sharing economy” hotspots. But the cost of renting in these suburbs is already exorbitant. Fitzroy was named the second-most-expensive suburb in Melbourne for apartment rental in 2015.

Instead, policymakers could encourage disruption in the suburbs that would benefit both sides.

What can be done to capture local benefits?

Airbnb claims that tourists who use the platform “stay longer and spend more”. Through taxation and additional revenue from the sharing economy, governments could fund more extensive and efficient transport networks to service both locals and visitors. Extending transport infrastructure would support the intensification of distributed neighbourhoods and maximise intermingling between tourists and locals.
Airbnb rentals in Perth. Jacqui Alexander, Author provided
Bottom-up densification could also be a way forward for Perth. The distribution of Airbnb accommodation towards Perth’s coastal suburbs highlights potential in this space: here, tourism-specific and local infrastructure can converge. This is an exciting prospect for a state that positions itself as a unique travel destination.

Airbnb emerges from the same cultural tendency as the pop-up shop and interim-use place activation. Built environment professionals must recognise it as an urban issue and lead with a framework for targeted, productive disruption.

Airbnb can increase the density of people within existing building stock, while dispersing the positive effects of the tourist economy. This requires more imagination from planners and designers, who first and foremost must consider the interests of individual citizens, whether they are renters or home owners.

Can Airbnb be a part of the solution of increasing urban infill without compromising a minimum standard of living?

The Conversation is co-publishing articles with Future West (Australian Urbanism), produced by the University of Western Australia’s Faculty of Architecture, Landscape and Visual Arts. These articles look towards the future of urbanism, taking Perth and Western Australia as its reference point. You can read other articles here.

Mortgage arrears increase over June quarter

From Australian Broker.

Mortgage arrears increased across Australia in the June quarter, driven by conditions in regional markets.

According to Standard & Poor’s Performance Index (SPIN), the global credit rating agency claims that prime Australian residential mortgage-backed securities (RMBS) transactions more than 30 days in arrears increased to 1.19% over the three months to June, up from 1.13%.

Standard & Poor’s’ data shows regional areas have been hit hardest by the increase in arrears. The past eight months have seen arrears in non-metropolitan markets increase from 1.24% to 1.77%, which the rating agency says reflects the greater vulnerability of regional areas to downturns in key industries or employers.

Though arrears increased nationally over the June quarter, Standard & Poor’s believe conditions will likely improve as 2016 rolls on.

“While prime arrears are up year on year, they are still below their peak of 1.69% and decade-long average of 1.25%. Furthermore, arrears generally start to drift lower in the second half of the year so we expect that arrears are likely to remain at these low levels in most parts of the country over the next quarter,” Standard & Poor’s said in a statement.

“The rate cut by the Reserve Bank of Australia in August will also help. Lower wage growth and higher household indebtedness are no doubt creating a degree of mortgage stress for some borrowers but we expect that relatively stable employment conditions and historically low interest rates will enable the majority of borrowers underlying RMBS transactions to stay on top of their mortgage repayments,” the statement said.

On a state-by-state basis, the data shows arrears increased in all states and territories over the June quarter, except for New South Wales where they remained unchanged.

Over the three-month period, Western Australia was home to the highest level of arrears at 1.95%, followed by Tasmania (1.62%) and South Australia (1.56%). The continued slowdown of the mining boom is identified as the reason behind conditions in Western Australia, while high unemployment is contributing to conditions in South Australia and Tasmania.

Five of Australia’s 10 worst-performing postcodes in terms of arrears were in Queensland in the June quarter, up from three in the March quarter.

Understanding Household Income, Wealth and Property Footprints

Today we commence the first in a new series of posts which examines household wealth, income, property and mortgage footprints. We will look at the latest trends in LVR and LTI; highly relevant given the tightening standards being applied in other countries, including Norway and New Zealand. We will be using data from our rolling household surveys, up to 9th September 2016.

Today we paint some initial pictures to contextualize our subsequent more detailed analysis, which will flow eventually into the next edition of the Property Imperative, due out in October 2016.

To start the analysis we look at the relative distribution of our master household segments. You can read about our segmentation approach here.

Next we show the relative household income and net worth by our master segments. The average household across Australia has an estimated annual income of $103,500 and an average net worth (assets less debts) of $600,600; the bulk of which is property related.

There are wide variations across the segments. The most wealthy segment has an average annual income of more than eight times the least wealthy, and more than ten times the relative net worth.

Across the states, the ACT has the highest average income and net worth, whilst TAS has the lowest income (half the income), and NT the lowest net worth (third the net worth).

Property owners are better placed, with significantly higher incomes and net worth, compared with those renting or in other living arrangements. Those with a mortgage have higher incomes, but lower net worth relative to those who own their property outright.

The loan to value (LVR) and loan to income (LTI) ratios vary by segment.

Young growing families, many of whom are first time buyers, have the higher LVR’s whilst young affluent have the higher LTI’s (along with some older borrowers). Bearing in mind incomes are relatively static, those with higher LTI’s are more leveraged, and would be exposed if rates were to rise.

Finally, we see that many loans have been turned over, or refinanced relatively recently, so the average duration of a mortgage is under 4 years.

There is a relatively small proportion of much older dated loans which we have excluded from the chart above. Nearly a quarter of all loans churned in 2015, and 2016 shows the year to date count.

Next time we will look at LTI and LVR data in more detail.

To Have a Killer Loyalty Program, Retailers Need to Think Big

According to eMarketer, just because a consumer joins a loyalty program doesn’t mean she’s active in it.

Loyalty programs have become an important marketing tool for retailers, and most companies entice shoppers to join these programs by offering rewards. But these incentives may not be enough to keep consumers satisfied and happy that they joined it in the first place. Retailers may need to think bigger, and more long-term.

Just because a consumer joins a company’s loyalty program doesn’t mean she’s active in it. Research from Bond Brand Loyalty, in partnership with Visa, found that the average internet user in North America belongs to about 13 loyalty programs for companies in various industries. Yet members are only actively participating in about half of the initiatives they have signed up for.

Perhaps consumers feel they aren’t getting enough out of some loyalty programs to continually participate in them, and retailers may need to change that. Some already have.

Take Sephora for example. The retailer’s loyalty program has an immense following, especially among beauty junkies. The program is simple: consumers who are interested start off at the Beauty Insider level, which is free to join—and every dollar spent earns them a point. VIB is the next level, and shoppers need to spend a minimum of $350 annually to reach it. Sephora’s VIB Rouge membership is its most elite, and to reach that, consumers would have to spend a minimum of $1,000 annually. As consumers climb further up the ladder to VIB Rouge status, they are met with more exclusive rewards like a private hotline and invitations to exclusive events.

And although Sephora has been successful with its loyalty program, the retailer has taken things a step further. Sephora recently introduced its Rewards Bazaar, where loyalty program members have access to new rewards—including samples, services and one-of-a-kind experiences—every Tuesday and Thursday. Some of these rewards include customer makeovers, which barely cost the company anything since their in-house makeup artists perform them. Other rewards are more high-end and limited, like a master makeup class at Anastasia Beverly Hills, or a Tory Burch gift set that includes a bag, wallet and perfume, among other things.

An initiative such as this—basically surprising and delighting customers—can boost brand perception. And an influx of rewards, especially those that are more tailored and personalized, can keep loyalty program participation going. A survey from loyalty marketing research and education practice Colloquy found that more than half of respondents who had joined a program in the past 12 months did so because they were able to earn points or miles on their purchases. Nearly as many had received a product or service offer. And 75% of respondents said they stayed in the loyalty program because the rewards and offers were relevant to them.

On the whole, the majority of US marketers intend to allocate more of their budgets to customer loyalty next year, research from multichannel loyalty and analytics company CrowdTwist and Brand Innovators revealed. In addition, about 13% said they anticipate significant increases in spending on such programs.

According to the data, more than half of respondents said they plan to put more dollars into their loyalty programs next year. Some 44% said they will somewhat increase loyalty budgets, and 13% plan to significantly. Only a mere 4% said they anticipate lowering investment.

The Top Digital Suburbs Around Adelaide

As we continue our series on Australia’s top digital suburbs, today we look at SA, and the region around Adelaide. The top postcode is 5159, which includes Aberfoyle Park, Chandlers Hill, Flagstaff Hill and Happy Valley in South Australia. The area is about 17 kms from Adelaide.

The location of digitally active households is becoming an increasingly important question, as mobile penetration and use climbs. It fundamentally changes the optimal marketing approach and channel strategy.

Using data from our household surveys we track the proportion of households with a preference for using digital devices – especially smartphones – for their banking interactions and other online activities. The latest data, which will flow in due course to our next edition of the Quiet Revolution – our channel analysis report – shows that there are large numbers of digitally savvy consumers and small businesses who want more digital, and less branch. They want a “mobile first” offering.

To illustrate this we map the current branch representation around Brisbane, based on the latest APRA points of Presence report.

Then we mapped the number of households by digital segments – identifying those seeking a mobile first solution – to postcodes. There is a striking mismatch between the two.

Here is the top 10 listing by number of digitally aligned – mobile first – households across SA. They vary by segment, age, zone and region.

This information is useful to anyone wishing to engage with these households because it highlights where the centre of gravity for online initiatives should be focussed. The point is that although households are in the digital world, they still have a geographic centre. Digital still has a geographic sense.

Looking at the banks, it seems that they are not heeding the geographic concentration of mobile first households, and nor are they fully comprehending the changes afoot. We think it likely there will be significant stranded costs in the branch network, and insufficient focus on “mobile first”banking offerings.

Households are leading the way.

Next time we will look at the state of play in Perth and then reveal the top ten digital suburbs across Australia.

Long-Run Economic Effects of Changes in the Age Dependency Ratio

A decrease in the labor force and an increase in the elderly population could slow economic growth, says economic research from the Federal Reserve Bank of St. Louis.

Important demographic changes in the developed world in recent years may have long-run economic consequences. As a result, such changes have started to play a more important role in the design of economic policies.

In a recent blog post, I analyzed changes in the age dependency ratio in the G-7 countries since 1990.¹ Thorough analysis of the evolution of this variable and its components is important because the young and old are likely to be more economically dependent on the rest of the population and changes in age composition may affect other areas of the economy.

Panel A of the figure plots the annual age dependency ratios for the G-7 countries from 1990 to 2012. The age dependency ratio is the sum of the young population (under age 15) and elderly population (age 65 and over) relative to the working-age population (ages 15 to 64). As the figure shows, dependency ratios have risen in all seven countries in the past 10 years. In some countries, however, the trend started earlier. In Japan, for instance, the increase started in the early 1990s. Changes in the age composition of the population—from increases and/or decreases in the young and elderly populations—drive the dependency ratios. As the figure shows, in all G-7 countries, the elderly populations (Panel B) have increased, while the working-age populations (Panel C) and young populations (Panel D) have decreased slightly or stayed flat. Among those countries, Japan’s age dependency ratio increased the most.

Several recent studies² suggest that high dependency ratios may have the following long-term economic
consequences:

Saving rates: As workers get close to retirement, they tend to increase their savings through pension plans, healthcare insurance, etc. Also, if younger workers anticipate changes in demographic trends, they could start saving more for the future (by investing more in private pension plans, postponing consumption decisions, or investing in private health insurance). Increased savings could have long-term economic consequences, such as a decrease in long-term interest rates. Eventually, as the elderly start retiring and birth rates start decreasing—as appears to be the recent trend—savings would start decreasing and long-term interest rates would rise. Thus, recent demographic changes could affect saving rates and long-term interest rates.

Investment rates: If savings decrease, there could be fewer funds to finance investment projects, which could decrease investment in physical capital. Decreased investment could reduce long-term economic growth.

Housing markets: A growing labor force would increase house prices. A recent article in The Economist finds that since 1960, house prices in a sample of 10 countries fell by 0.2 percent per year as the age dependency ratio increased. Because the demographic composition of the labor force contributes strongly to the trend in house prices, fewer young people, together with a large increase in the elderly population, would likely result in less investment in the housing market.

Consumption patterns: An increase in the elderly population could shift consumption from certain goods toward healthcare services and leisure.

In summary, the decrease in the labor force, due to an increase in the elderly population and a decrease in the fertility rate, could translate into lower economic growth. Long-term problems in the developed world caused by an increase in the age dependency ratio could be alleviated by either increasing productivity (to avoid an economic slow-down from a shrinking labor force) or increasing the labor force participation of the elderly (e.g., by increasing the retirement age, as several European countries have done recently, or reducing taxes on the labor income of elderly workers). These economic policies, however, would not reverse the recent demographic trends.

Notes

¹ Santacreu, Ana Maria. “How Are Populations Shifting within Developed Countries?” Federal Reserve Bank of St. Louis On The Economy Blog, August 11, 2016; https://www.stlouisfed.org/on-the-economy/2016/aug….

² Economist. “Vanishing Workers.” July 2016, 420(8999), p. 58, http://www.economist.com/news/finance-and-economic…. Karp, Nathaniel and Nash-Stacey, Boyd. “Slow Productivity Growth: Cracking the Code.” BBVA Research U.S. Economic Watch, August 4, 2016; https://www.bbvaresearch.com/wp-content/uploads/20….

Cities will just be playgrounds for rich if poor keep being pushed to suburbs

From The Conversation.

Successive governments in Europe have impressive visions for the future of our cities. These reject the divisive urban model of earlier decades, where richer people moved to low-density, car-dependent suburbs, leaving inner cities predominantly to the poor.

In the sustainable cities of the future, the vision is to attract richer people back to city centres. This will reduce their need to travel and increase public transport use. Importantly, these movements are supposed to bring about more mixed communities of people from different walks of life, living alongside one another harmoniously.

To achieve this urban renaissance, the UK has, for example, been directing housing development towards brownfield sites in the core of cities, limiting greenfield development at the edge. It has also been among those pushing substantial investment through urban regeneration schemes in land preparation or infrastructure.

Sure enough, this has halted and in some cases reversed the population losses which core cities have experienced for decades as richer people have been attracted back to the centres. Yet poorer people are being pushed out; poverty is “suburbanising”. We have seen this pattern in the US and more recently in England, particularly London.

Scotland’s four largest cities are also experiencing this trend, as new data confirms. In Glasgow, Edinburgh, Aberdeen and Dundee, the share of each city’s population living near the centre either stayed the same or rose between 2004 and 2016. At the same time, the proportion of poorer people has been falling (see graphs below).

Income-deprived population living in central city (%)

Non-deprived population living in central city (%)

The central area of Edinburgh has seen a loss of approximately 4,000 people in low income households over the period. In Glasgow, Scotland’s biggest city, where this trend has been identified before, the figure is approximately 6,000. For the smaller cities of Aberdeen and Dundee, the losses were around 400 and 700 respectively.

Segregation

What is driving this change? As city living has become more popular, poorer households are finding it harder to compete for housing. Social housing stock has fallen for decades, meaning those in poverty are having to rely more on renting privately. When cities attract wealthier people, landlords can charge rents that poorer people struggle to afford.

Meanwhile, recent welfare reforms have successively cut the housing benefits that subsidise rent payments for those on low incomes – at the same time as inequality levels have been rising more generally. The net result is that these people are pushed towards cheaper areas, away from the more central neighbourhoods.
Edinburgh’s Royal Mile. Andy Ramdin, CC BY-SA
As in other countries, this suburbanisation of Scottish poverty looks to be a steady but largely hidden process. If it continues, the cities of the future will be far from the visions set out by policymakers and planners.

Instead, they will continue to be marked by segregation and deep division, only now with poorer households pushed to the edge. That has potentially serious implications for these people’s welfare, particularly their ability to access employment. It also threatens broader social cohesion. If politicians are serious about their visions for the future, it is time we recognised these trends and started talking about how to halt them.

Author: Nick Bailey, Professor of Urban Studies, University of Glasgow;
Jonathan Minton, Quantitative Research Associate, University of Glasgow

Two million Aussies are experiencing high financial stress

From The Conversation.

A new study shows two million Australians are experiencing high financial stress which prevents them from coping in difficult situations, for example, in paying unexpected expenses such as a big mobile phone bill or the fridge breaking down.

Adults face these sorts of scenarios frequently. When they arise, people usually turn to savings, a credit card, or a friend or family member to help out.

Our report, Financial Resilience in Australia, funded by the National Australia Bank, quantifies the amount of Australians: experiencing problems paying debts; meeting the costs of living; and accessing appropriate, affordable and acceptable financial products and services.

It also shows some Australians have trouble accessing social support in times of crisis and may have low levels of financial knowledge.

Our research measured financial resilience by the four key resources that support it: personal economic resources (such as savings), financial products and services (such as insurance), financial knowledge and behaviour (including financial literacy), and social capital (having social support in times of crisis, including friends and families).

Many Australians simply don’t have the resources to bounce back. For example, around:

One in two adults have limited to no savings

One in two only have a “basic understanding” of financial products and services

One in ten have unmet need for credit and/or insurance

One in five have limited or no social connections

One in 30 stated they needed but did not have access to any form of government or community support.

This has implications for the short and long-term impact on individuals and their families.

Who is most at risk?

Our research found secure housing, steady income, education, being employed and good mental health are strongly associated with financial resilience.

On average, financial resilience is significantly lower among people who are homeless, living in social housing, are short-term renters or live in student accommodation.

Financial resilience increases with the level of education and, unsurprisingly, people with very low personal incomes fare poorly.

Employment status is a key marker. People who are unemployed, underemployed, not in the labour force and those who only work odd jobs are more likely than their full-time employed counterparts to have lower levels of financial resilience.

People with a serious mental illness are significantly more likely to be in severe or high financial stress, are less likely to be financially secure and fare worse on each of the individual resource groups than people without mental illness.

The gender split in financial resilience is fairly even overall. However, the four components of financial resilience are influenced by gender. Women have lower general levels of economic resources than men, but men have lower levels of social capital than women.

People who were born overseas in a non-English speaking country have lower levels of resilience than those who were born in Australia. Finally, the influence of age on financial resilience varies and is often affected by other factors.

One in four study participants reported difficulties accessing financial services. The barriers are varied, but include cost, trust, poor and inadequate services, and (for a few) language, disability and discrimination.

This underscores the importance of making financial information, products and services more user-friendly and accessible. This will ensure these resources are available and accessible to everyone who needs and wants them in society.

The factors influencing financial security are not surprising. People who own their own homes, have a university-level education and have a personal yearly income of more than A$100,000, for example, have higher levels of financial resilience. However, only 35.7% of Australians are financially secure.

The prevailing attitude around financial problems is that individuals are solely responsible for their situation. Our research challenges this ideas as it shows multiple aspects to financial resilience, some out of the individual’s control.

The below shows how interlocked the different components of financial resilience are and when pieces of the puzzle are removed, the most vulnerable people are at risk.

At the moment social sector leaders are lobbying the government to scrap proposed budget cuts that will reduce the amount of certain welfare payments. Our research shows these same people have the least resilience to bounce back if they were to lose some financial support.

This is an example of how the government needs to play a more active role in understanding financial resilience and where support is needed. By understanding the often interrelated elements of financial resilience, tipping points and who is most at risk, prevention and intervention can be better tailored.

Authors: Rebecca Reeve, Senior Research Fellow, Centre for Social Impact, UNSW Australia; Kristy Muir, Professor of Social Policy / Research Director, Centre for Social Impact, UNSW Australia