Australian households are increasingly stressed by high energy prices and fears about eventual official interest rate rises.
The survey of 1,500 people by ME Bank highlights the rising cost of necessities — including fuel, groceries and utilities — that, together with weak wage growth for lower-income households, is widening the gap between rich and poor.
The bank’s latest Household Comfort Report echoes concerns expressed late last week by Coles managing director John Durkan that some households are trading off fresh meat and produce to pay surging energy bills.
ME Bank consulting economist Jeff Oughton said the survey highlighted the pressure on Australians, especially low-income households, who are becoming increasingly stressed about balancing their budgets.
“Australian households are under financial stress. They’re concerned about the rising cost of bills but also there are income woes, interest rates are starting to rise and there’s mortgage and rental stress,” Mr Oughton told the ABC’s AM program.
“People are concerned there’s more to come. Almost half of Australians have no spare cash at the end of the week and very little cash savings in the bank. “You can wear your clothes a bit further and maybe you don’t buy a new PC, but people with constrained incomes — and that’s 40 to 50 per cent of Australians — are feeling this bill shock.”
However, the surveyed found that, overall, Australian households were a little bit more financially comfortable than they had been six months ago.
Mr Oughton said highly indebted households are particularly exposed, especially those with low incomes.
The Reserve Bank governor has helped hose down fears, giving the strongest hint he can that rates are moving neither up nor down for a long time.
“It will bite into those young couples with children, single parents and also generation X-ers who are concerned about the impact on their monthly cash flows from rising rates,” he explained.
The Reserve Bank board meets Wednesday with the cash rate almost certain to remain on hold.
However, many economists believe the RBA is signalling eventual rate rises and has been investigating a neutral normalised rate of 3.5 per cent on the basis that inflation returns to around 2.5 per cent.
The study found 27 per cent of those surveyed had suffered income cuts in the past year, and that 40 per cent of households were paying a mortgage or rent using at least 30 per cent of their pre-tax income for housing payments.
It warned that 40 per cent of indebted households are becoming more worried about their ability to cover mortgage repayments.
Mr Oughton said the research confirmed widening inequality in Australia.
“There’s a widening divide here across income, across housing tenure, which is a proxy for wealth, and there’s a widening gap across the labour market as well,” Mr Oughton said.
The report also underscored concerns that underemployment is becoming a bigger problem for many Australians.
In the survey, 27 per cent of casual and part-time workers said they were eager to increase their hours and work, with one-in-five people looking for full time work.