Measures of household financial stress are about as numerous as the research bodies that collect the data and report on them. It makes for a fertile but tricky field of analysis, and now a new player has entered the field.
Your Financial Wellness, a provider of financial literacy and budgeting tools to financial institutions, has released the results of research showing 46 per cent of Australians “experience some financial stress”, 51 per cent sometimes worry about meeting normal monthly expenses and 27 per cent report “high or overwhelming financial stress”.
These numbers are higher than the stress levels reported by other surveys. Measures based on respondents’ feelings about their financial situation tend to show high levels of stress. These include the Your Financial Wellness and Melbourne Institute surveys.
Reports based on objective measures, such as those done by the Australian Bureau of Statistics and Roy Morgan, tend to show lower levels of stress.
And in recent reports, subjectively based measures show stress levels rising, while objectively based measures show stress falling.
In a survey conducted over the three months to May, Roy Morgan found that 17.3 per cent of home loan borrowers were “at risk” or “extremely at risk” of mortgage stress. This level is down from 19.4 per cent at risk or extremely at risk in the three months to May 2020.
Roy Morgan said the fall reflects the improvement in employment in the first half of 2021, as well as the impact of government stimulus measures and bank forbearance.
Roy Morgan measures mortgage stress in two ways: borrowers are at risk if their mortgage payments are greater than a certain percentage of after-tax household income (25 to 40 per cent, depending on income and spending); and they are considered extremely at risk if the interest component of their payments is over those percentages.
According to ABS data released earlier this month, in the December quarter last year 7 per cent of households could not pay a gas, electricity, telephone or internet bill on time.
This is down from 10 per cent of households facing the same level of financial stress in the December quarter 2019.
The ABS also found that 49 per cent of households were saving regularly in the December quarter last year, compared with 46 per cent savings regularly in the December quarter 2019.
Eighteen per cent of households in the lowest income quintile paid more than the minimum repayment on a credit card or personal loan in the December quarter last year, compared with 14 per cent in the corresponding period in 2019.
In March, the Melbourne Institute released the results of a survey showing the number of people experiencing financial stress is increasing, especially among the self-employed, despite the strong economic rebound.
The proportion of survey participants reporting financial stress (having difficulty paying for essential goods and services) increased from around 20 per cent towards the end of last year to 31 per cent in March – the same level of financial stress as April last year.
The survey also found there was increase in the level of mental stress, with 24 per cent reporting that they feel depressed and anxious most of the time – a record high for the survey.
The Melbourne Institute said job insecurity was the most likely cause of financial and mental stress. About half the self-employed are financially and mentally stressed, while those employed on a continuing basis have the lowest stress rates of any group.
The author of the report, Guay Lim, said the results suggest that the economic recovery is not being felt equally across Australian society.
Lim said: “This is an opportunity for policy makers to address the persistent issues of job insecurity and underemployment, particularly among low and middle income earners.”
Your Financial Wellness found that women report lower levels of “financial wellness” than men, that older people feel more financially secure, home ownership is a strong indicator of financial wellness and people with a couple of months’ salary saved feel markedly better about their financial position.
It also found that a high income does not necessarily reduce stress, with 11 per cent of households with annual income over A$125,000 reporting that they were stressed.
Only 20 per cent of respondents reported being fully satisfied financially.
The research for the Your Financial Wellness was conducted by the Centre for Social Impact at the University of New South Wales and was based on 3000 detailed responses.
The researchers also looked at how much financial literacy underpinned financial wellness, reporting that respondents who could correctly answer internationally recognised financial literacy questions also had higher wellness scores.