Household Financial Comfort

Australian households are feeling overall worse about their net wealth, jobs, income and living expenses with further significant residential property price falls over the past six months and a weakening labour market, ME's latest Household Financial Comfort Report has revealed.

Consulting Economist for ME, Jeff Oughton, said that despite remaining a little above the report's seven-year average, financial comfort across most of the 11 drivers that make up the Index fell, with net wealth in particular seeing the largest drop, falling 3% to 5.54 out of 10 during the six months to June 2019.

"The financial comfort of Australian households eased over the past six months, with a significant fall seen in comfort with wealth. Despite lower mortgage loan rates, expected cuts in personal income tax and higher local and global equity prices, this is largely a consequence of continued decreases in the value of residential property in many parts of Australia," said Oughton.

"Comfort with wealth would have fallen much more if it wasn't for record bond prices and rebounding share markets as well as the Government's retention of negative gearing on investment properties and cash refunds for franking credits that saw household comfort with investments increase."

Financial comfort with investments (in financial assets, such as shares and super, and property) was the only driver across the index to improve (up only 1%), but was largely accrued by households with high incomes. Households with incomes of $200k+ per annum and large superannuation balances (above $1 million) reported increases to overall financial comfort by 10% to 7.45 and 11% to 8.3, respectively, during the six months to June 2019.

A weakening labour market and subdued income growth weigh on comfort

Financial comfort among households also eased as a consequence of a weakening job market, which resulted in subdued wage growth, falling comfort with income and high levels of both underemployment and job insecurity.

In particular, financial comfort among working Australians significantly deteriorated, with full-time workers recording a 3% decrease to 5.86, part-time workers decreasing 4% to 5.1, casual workers decreasing 1% to 5.02 and self-employed workers down 3% to 5.57.

Oughton said: "It's clear from the latest Report that there are increased concerns around job availability and underemployment. The number of workers who felt it would be difficult to find a new job increased by 16 percent to over 1 in 2 employees, which is the highest recorded since late 2016."

In June 2019, 35% of part-time and casual workers said they would prefer to work more hours – seeking an additional 23 hours per week. Meanwhile, 26% of all workers said they felt insecure in their current job.

Households' comfort with their incomes also fell by 1% to 5.69 in the latest survey. Only 36% of Australian households reported an increase in their annual income during 2018/19, falling 2 points from December 2018, and there were fewer income gains recorded across households in general. Higher income households also continued to be much more likely to report increased incomes during the past year.