Record numbers of Australians are struggling with their finances according to the Household Financial Comfort Report released recently by ME Bank.
The bank’s research found 65 percent of Australian households have outstanding debts. This has seen the country’s Household Financial Comfort Index, which considers income, net wealth, and cash savings, fall by 4 percent. The national average stood at 5.37 out of 10 in the first six months of 2016. Some groups have recorded even greater falls, such as baby boomers, whose Household Financial Comfort Index dropped by 7 percent.
South Australia and the Northern Territory, grouped together for the study, was the only region to improve its Household Financial Comfort Index, with an increase of 3 percent taking its rating to a historic high of 5.72. A 2 percent decrease gave Western Australia a comfort index of just 5.02, the lowest recorded in the country. Victoria and New South Wales/Australian Capital Territory reported relatively modest decreases to sit at 5.52 and 5.4 respectively. It was a disastrous six months for Tasmania, with households there recording a massive comfort decline of 18 percent for a rating of 5.12.
Just 10 percent of the population reported high levels of comfort. That the fourth lowest percent noting high levels of comfort since ME Bank began conducting the study almost five years ago. That means the great majority of Australian households have low to mid-levels of financial comfort.
“With a lack of cash savings or equity buffer in their home, there’s a marked increase in households expecting to be unable to service their debts, despite record low borrowing costs,” Jeff Oughton, ME Bank’s consulting economist and the co-author of the report, noted in a ME Bank media release.
“The findings clearly indicate heightened concerns around the adequacy of income, the cost of necessities, lack of job availability and security as well as deterioration in expectations about meeting minimum debt payments and maintaining a standard of living in retirement,”
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