The financial fallout of the pandemic has been as challenging as the health risks, but the stress and hardship arising from the pandemic has not been the same for all Australians, according to National Australia Bank’s latest financial wellbeing survey.
Financial stress can impact mental health by creating anxiety and uncertainty in people’s lives. This can create a vicious cycle impacting their ability to take action to improve their financial wellbeing, said NAB in a new report.
The lender’s Household Financial Stress Index lifted to 43.5 percentage points in the June quarter - up from 42.2 points in the prior quarter - driven by rising concerns over food and necessities, utility bills, credit card repayments, and other monthly household expenses.
Although financial stress is the top cause of anxiety for most Australians, there is a growing economic divide as financial stress rose among lower-income groups but fell for high-income earners.
The NAB report found that stress levels for lower-income workers jumped up 4.6 percentage points to 52.5 but fell 0.9 percent for high-income workers to 37.4 points with the gap now at its widest since the 2020 first quarter.
“This may in part reflect changing assistance measures and disproportionate impacts of lockdowns and other Covid restrictions on some in the community,” the report’s authors said.
Fewer opportunities to spend
For some Australians, savings have gone up during the pandemic as there have been fewer opportunities to spend in some areas. Higher-income groups appear to have accumulated more savings than in previous years. For those in a lower income bracket, a drop in income has caused savings to decline and debt to rise. In the June quarter, in net balance terms, savings fell for 45 percent of low-income earners and debt rose for 10 percent of this group. This compares to just 3 percent of high-income earners who saw their savings fall, while debt levels fell rather than rose for 19 percent.
Financial stress related to savings was noticeably higher in the under 50 age group. That said, more Australians are optimistic that their income will increase over the next 12 months.
In terms of debt stress, loans from family and friends (59.5 points) replaced payday loans (57.7 points) as the top concern, followed by personal loans (55.4 points), and home loans (47.1 points).
Despite an uptick in the share of the population holding credit card debt, stress remains lowest for credit cards (43.6 points), followed by investment loans (46.6 points) and buy now pay later loans (46.3 points).
Fewer Australians made inroads into reducing their household debt levels in the June quarter. Credit card debt is still the most widely held, rising to a survey high 57 percent of all Australians (significantly up on 41 percent for the prior quarter).
Home loans held rose slightly (44 percent versus 41 percent) and was the most common debt held among 30 to 49 (62 percent) and 18 to 29 (37 percent) year olds. Around 22 percent of Australians overall had a personal loan (16 percent in the first quarter), rising to 32 percent of 18- to 29-year-olds.
With house prices continuing to rise, the number of Australians who thought now was a good time to buy a home fell, along with intentions to buy over the next year.