NAB’s Chief Economist, Alan Oster provides his thoughts on the Australian and Global economy.
Financial anxiety rises again in Q1 2020 and 4 in 10 Australians experience some form of financial stress or hardship.
In this podcast, NAB’s Head of Behavioural & Industry Economics Dean Pearson discusses how Australians are feeling in response to the Coronavirus.
NAB’s Financial Anxiety Index rose for the third straight quarter in Q1 2020 to 61.4 points, from 58.8 points in Q4 and now sits above average (60.1 points). Australians aged 30-49 and 18-29 remain the most anxious by age. However, the biggest rise in anxiety was reported by people over 65, perhaps reflecting the impact of the coronavirus on their superannuation and other investments and lower interest rates.
Around 4 in 10 Australians also said they had experienced some form of financial stress or hardship over the past 3 months. But that number is much higher for the unemployed (58%), low income earners (55%) and young people (52%).
While there is a vast amount of research available on general anxiety, there is much less concerning the emotional aspects of our finances.
NAB’s Head of Behavioural & Industry Economics Dean Pearson said, “Some anxiety around money is incredibly common, but if these concerns start to have a major impact on people’s wellbeing, it can become a serious problem.”
“After 29 years of uninterrupted economic growth many Australians have become accustomed to a growing level of prosperity, so we would expect to see an impact on people’s sense of financial wellbeing due to the virus.”
“While the government has taken unprecedented action to support the economy and keep people in employment, many Australians are likely to feel financially more vulnerable, even those that may have not been directly impacted financially to date”, said Dean.
The gap in financial anxiety between women and men narrowed somewhat in Q1, however anxiety remains higher for women.
“Women earn less than men so it’s not surprising they face more financial struggles. They’re also still more likely to be the primary carers for children and elderly parents, and that can also impact their financial position, particularly during this crisis” said Dean.
There continues to be a strong relationship between financial anxiety and income, with a progressive step down in anxiety from the lowest income group (69.2 points) to the highest income group (55.2 points).
Early indications show that financial anxiety rose from 60.6 points during the first survey wave of 1,000 people (Mar 12-16) to 62.2 points during the second survey wave (Mar 17-20).
Financial anxiety rose in Q1 2020 across all key demographic groups, except one interesting exception – the unemployed. While timely, the survey closed on March 20, so it predates some of the more recent impacts on employment of the virus.
“With so many Australians expected to become jobless, those already unemployed may be looking at their financial situation in a slightly different light, perhaps with the feeling that more of their fellow Australians are in the same boat”, said Dean.
NAB’s survey also explores the “drivers” of financial anxiety – simply what makes us financially anxious. While all drivers contributed more to overall stress levels in Q1 2020, financing retirement remains the single biggest cause of financial anxiety. MLC research shows that more than 1 in 2 Australians don’t think they’ll have ‘enough’ wealth to live to their desired standard in retirement’.
“Retirement is essentially a bet on the future and it’s often the unexpected nature of change that makes it so unsettling” said Dean.
Outside of retirement, other top concerns include providing for our family’s future and medical bills and healthcare. But some groups are more anxious than others.
Unemployed people worry more about all drivers of financial anxiety than the average Australian, but especially providing for their family’s future, food & necessities, normal and other monthly household bills, and medical bills.
Women worry much more than men about raising money for an emergency, their children’s education and mortgage or rents costs. Australians over the age of 65 are least worried about all drivers of financial anxiety, as are Australians in the highest income group.
For those Australians not only feeling financially anxious but experiencing financial stress or hardship, not having enough money for an emergency was the most frequently cited cause, particularly for the unemployed, low income earners and young people aged 18-29. This was followed by not being able to pay a bill and not having enough for food or necessities.
Around 1 in 4 people in the lowest income group and aged 18-29 said they did not have enough for food and necessities. Almost 1 in 5 unemployed Australians struggled to meet the costs of their medical bills.
While timely, the survey closed on March 20, so predates some of the more recent restrictive measures to contain the coronavirus. It does however serve as an important benchmark from which to gauge how financial anxiety changes from here and whether it starts to impact a broader group of Australians.
Learn more in the NAB Australian Wellbeing Survey Q1 2020 (Part 2)
© National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686.