A lack of cash savings has emerged as one of the biggest areas of concern among Australian households, according to ME Bank’s biannual 'Household Financial Comfort' survey, conducted in June 2014.
In June, only 46 per cent of households reported the ability to save each month, the lowest level since the bank's first survey in October 2011 (and a fall of 3 per cent from December 2013); 12 per cent were overspending by drawing on savings, loans or home equity, while 42 per cent were breaking even.
Of those saving, the amount saved per month fell 12 per cent to $735 per month, and of those overspending, the amount overspent rose 13 per cent to $501 per month. About one third of households (35 per cent) also reported having less than $1000 in cash on hand, a rise of 7 per cent during the past six months, while 24 per cent said they could not raise $3000 in an emergency, a rise of 6 per cent.Unsurprisingly ‘level of cash savings on hand’ appeared as a major concern, reported by 36 per cent of respondents.
Overall household financial comfort falls – and is expected to continue falling Concern about cash savings was a key factor that contributed to an overall 3 per cent fall in ME Bank’s Index to 5.33 out of 10, largely reversing previous gains in 2013. Other factors contributing to the fall in the overall index were a marked drop in ‘expectations for financial comfort over the next year’ and, to a lesser extent, falls in comfort with ‘household income’ and the ‘anticipated standard of living in retirement’.
Federal Budget fuelling discomfort Expectations for the next year fell sharply by more than 10 per cent from December 2013 to an index of 5.1 (out of 10) in June, the lowest since the survey began. There is a strong link between a fall in future expectations and the 2014-15 Federal Budget, with 67 per cent of households expecting their financial situation to worsen over the next year as a result of the proposed tightening of government assistance in the Federal Budget.
The survey clearly identifies the Federal Budget as a factor negatively affecting many households, with the ‘impact of legislative change on my financial situation’ now appearing as a top concern for households for the first time – 29 per cent of households identified it as their biggest worry, a rise of 12 per cent since December 2013.
The Budget had a greater negative impact on those groups dependent to some extent on government assistance, with overall financial comfort falling significantly in the six months to June 2014 for unemployed people (down 22 per cent), tertiary students (down 8 per cent), government-assisted single parents (down 12 per cent), couples with primary and teenage children (down 7 and 13 per cent, respectively), and government-assisted retirees (down 15 per cent).
Falls in household income and anticipated standard of living in retirement Comfort with ‘household income it fell 5 per cent (to 5.55 out of 10). Accoring to Jeff Oughton, ME Bank consulting economist: “Household income has been negatively impacted by relatively low average wage growth, moderate job gains, rising unemployment and corresponding falls in job security over the period, as well as an anticipated tightening in government income assistance and tax benefits announced in the Federal Budget. About the same proportion of Australians (30 per cent) reported income gains as income falls during 2013/