Finance Finance News ‘Two-speed recovery’: Financial stress on the rise for the first time since COVID-19 crash

‘Two-speed recovery’: Financial stress on the rise for the first time since COVID-19 crash

Financial stress rose in the March quarter as the federal government wound back its COVID support. Photo: Getty
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The number of Australians stressed about their finances has risen for the first time since the COVID-19 crash, new research has revealed.

More people saw their savings erode than grow in the March quarter, while debt fears also rose as government income support tailed off, according to National Australia Bank’s latest financial wellbeing survey.

The bank’s household financial stress index rose 2.9 points to 42.2 as a result, the first rise since the onset of the pandemic in March last year.

“The number of Australians who experienced some form of financial hardship also grew,” NAB economists said on Tuesday about the report.

“Not having enough money for an emergency is the most common cause.”

The bank calculates the index by surveying households on 14 common pressure points that cover income, expenses, savings and debt.

A score of 0 means participants are “not concerned” while a score of 100 means they are “extremely concerned”.

On those measures, most Australians are feeling less stressed about money than this time last year, with the latest score slightly below the seven-year index average. That’s the good news.

The bad news is that dominant financial fears like not having enough money for retirement and saving for the future are front of mind, as some feel the effects of ending bill deferrals and the winding back of income support.

Two-speed recovery

About 70 per cent of those who lost their main source of income during the pandemic recession experienced hardship in the March quarter, up 7 percentage points on the December survey.

NAB executive Campbell Morrison is responsible for helping customers struggling to pay their bills and called this a “two-speed recovery”.

“You’ve got part of the economy that’s better off. They might have cashed out some super, they’re working from home [and not spending on] public transport, coffees or lunches,” he told TND.

“Then you’ve also got people struggling.”

Mr Morrison said NAB is working with about 10,000 customers who are still struggling to pay their mortgage.

Although this number is down from 110,000 last year, it nevertheless exposes underlying financial hardship.

“Half of them felt the impact very viscerally through 2020 and are now back at work meeting repayments. They’re in arrears but recovering,” Mr Morrison said.

“There’s about 1500 customers that are really still struggling, [and] we’re working with them on resume building and job interview skills.”

Although the labour market is improving, 16 per cent more households reported lower income levels in the March quarter than did not, a sign that many people are still struggling to find consistent work.

Inadequate savings

This shows up in more Australians reporting lower savings, because as government support ends more people are forced to dip into their emergency funds if their pay packets don’t cover all their bills.

The net number of households who reported a decrease in savings in the March quarter was 19 per cent, NAB found, with women’s average savings falling by 25 per cent and men’s down by 13 per cent.

Mr Morrison said this was playing into fears about not having enough money to get by in an emergency or to fund retirement.

“You’ve got a lot of people with not much of a savings buffer,” he said.

“There are a lot of people who were tight anyway and COVID-19 brought that to a head.”

Households are more optimistic about the future, though. The net number expecting savings to increase over the next 12 months was 7 per cent.

Debt concern rises

But while Australians are expecting to save more, there are growing fears about the levels of debt they are carrying.

Debt concerns in March rose for the first time since the height of the pandemic last year, up to 52.6 points on NAB’s index.

That’s despite 12 per cent more households reporting lower debt levels than those reporting higher debt over the March quarter, with 23 per cent more people expecting they’ll owe less money in 12 months than now.

In other words, many Australians used whatever government windfalls they received during the pandemic to pay down debt, but now that we’re paying our own bills again, concern about repayments is rising.

High-interest payday loans are still the biggest stressor (65.8 points), but are only held by 8 per cent of households surveyed by the bank.

Interestingly, NAB surveyed buy-now-pay-later bills for the first time over the March quarter, finding 18 per cent of survey participants carried such debt.

Stress about BNPL debt was relatively low, recording 46.1 points on NAB’s financial stress index, behind only credit cards at 42.9 points.

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