ME Bank has released its latest Household Financial Comfort Report, which revealed that household financial comfort has increased by 4% to an index reading of 5.5 out of 10 – the highest level since the index was first established in October 2011.
The index, which based on a survey of 1,500 households conducted in June, measures how comfortable Australian households feel about their financial situation, as well as their expectations and confidence with respect to their finances on a scale of 1 (least comfortable) to 10 (most comfortable).
According to the report:
The positive effects from a strong rise in share markets and to a lesser extent the Australian housing market over the past six months have boosted the value of direct investments and superannuation of most households…
Lower borrowing costs have also increased most households’ comfort with their debt burdens and boosted their cash savings. It has also improved their expectations for financial comfort during the next year and in the longer term their standard of living in retirement…
Households remain fairly cautious overall, however, prefering less risky investments and choosing to save and increase mortgage repayments, with savers (51%) outnumbering spenders (49%) for the first time:
Households have preferred to pay back debt, with the number of households putting extra money into loan repayments increasing 6% to 56% in the six months to June, while investing in direct shares and bonds remained unchanged at 22% of households…
Overall, households’ are most worried about the cost of necessities (52% of households), level of savings and cash on hand (40%), their ability to maintain standard of living in retirement (32%), and the impact of the global economy on Australia (31%).
As the Reserve Bank has continued to cut rates to stimulate the economy, Australians have continued to build a savings buffer and they remain financially cautious…
Households without stay-at-home children are the most financially comfortable, with empty nesters leading the pack, most likely due to the recent uplift in asset values. However, financial repression looks to be harming retirees, who are suffering the “negative impact of lower deposit rates on their investments…[but]…unlike most other households, retirees have experienced little, if any benefit from lower borrowing rates given a lack of debt” (see below table).
Full report below.
