NAB Australian Wellbeing Report: Q2 2020 (Part 2: Financial Wellbeing)

Financial Anxiety falls to below survey average levels in Q2 2020.

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What a difference just three months can make in the perceptions of Australians about their lives. Back in March, the picture was rather grim. In addition to big spikes in general anxiety, consumer and financial anxiety also rose as Australians tried to make sense of the economic, emotional and direct health implications of COVID-19. Today, as we report on the last of our Q2 surveys, things couldn’t be more different.

The NAB Household Financial Anxiety Index fell in Q2 to a below average 57.7 points, from 61.4 points in the previous quarter. All drivers of financial anxiety contributed less to overall stress levels in Q2. Financing retirement remains the biggest contributor to financial anxiety for all Australians, but the level of concern also eased slightly. Financial anxiety declined across most groups, including low income earners and the unemployed.

The share of Australians who experienced some form of financial hardship in the past 3 months also fell to 33% in Q2, down from 40% in Q1. Despite the challenges brought about by COVID-19, this was the lowest number in 3 years.
These results occurred against a background of higher levels of unemployment, falling house prices, stock market volatility, and elevated household debt levels.

Australia has clearly been doing relatively better than many other countries, with notably fewer confirmed cases of COVID-19 for the size of our population. But there are also significant stabilisers in place shielding the population from the full extent of the economic crises unfolding. Once government subsidies, superannuation releases and repayment holidays come to an end, a different financial wellbeing story may yet emerge. And, while on average financial anxiety has declined, there remain some concerning differences in levels of anxiety among specific groups of Australians.

Financial anxiety remains highest (and by some margin), for the unemployed (69.2 points), although this fell from 71.4 points in the previous quarter. There also remains a very large gap between the lowest (63.6 points) and highest (52.2 points) income groups, and the gap between women (59.1 points) and men (56.2 points) has widened. Financial anxiety is also much higher for younger people (61.5 points in the 18-29 age group). There are also differences around our ability to manage debt by age, income and employment. Overall, 70% of Australians holding debt indicated their level of debt was “manageable”. Only 5% said they had “far more debt than manageable”.

However, three times as many low-income earners had “far more debt than manageable” (9%), compared to the highest income group (3%). Almost 1 in 10 unemployed people (9%) also have far more debt than is manageable.
The type of debt held also appears to be important, with one in particular, impacting financial wellbeing – short-term payday loans. Australians aged 18-29 with pay day loans rated their anxiety about this debt much higher (67.8 points out of a possible 100 points). Around 6% of all Australians indicated they had loans from a pay day lender, but that number was almost four times as high in the 18-29 age group (23%).

While credit cards are the most commonly held debt, they appear to be causing the least anxiety. When asked to rate their concern, on average people scored 44.8 points (down from 46.9 points in Q1). Stress arising from credit card debt was however higher in the 18-29 age group (56.9 points).

With the economic and financial impacts of COVID still playing out, new NAB research looks at the financial resilience of Australians – their ability to bounce back from a financial shock. When asked how long their household could afford to cover expenses at their current level of spending without having to withdraw money from their retirement savings or borrow, almost 6 in 10 Australians believe they could manage for 3-months or more, and over 1 in 3 more than 6 months. Around 1 in 20 (5%) Australians said they would last less than a week. But, this number climbed to around 1 in 10 (11%) for unemployed people and in the lowest income group.

In relation to bill payment, on average, most people – around 7 in 10 (or 69%) – said they had paid all their bills on time. But some groups struggled more than others. By age, while 84% of those aged over 65 said they paid on time, this fell to just 57% of those in the 18-29 age group. By income, while 73% of those in the highest income group could pay, this fell to 63% in the lowest income. Unemployed people struggled the most to pay all their bills on time, with only 56% able to do so.

Finally, we wanted to know how confident Australians were that their insurances would provide them with enough support in case of an emergency. Most Australians believe they are under-insured. Overall, just 44% of people were either “very confident” (15%) or “moderately confident” (29%) that their policies would provide them enough support. One in 10 (10%) people overall were “not at all confident” their insurance would provide enough.

Learn more in the NAB Australian Wellbeing Survey – Q2 2020 (Part 2 – Financial Wellbeing)