Australians' finances under pressure despite 20-year high in household savings

A lack of personal savings has six in ten Australians concerned about their current financial situation and one in three indicating they would be unable to cover basic expenses for longer than a few weeks if faced with a sudden job loss.

These findings are from illion’s latest Consumer Credit Expectations Survey, which examines expectations for savings, credit usage, spending and debt performance during the September quarter 2012, and they come as national household savings levels are at a 20-year high. Despite this, the survey found that a third of low-income earners and a quarter older Australians would only be able to survive for up to one month without a steady income.

This finding comes as three-quarters of Australians in these groups express concern over their personal finances. Sixty-nine per cent of those earning less than $50,000 annually and 62 per cent of consumers aged 50-64 are worried about their personal financial health.

In addition, one in four low-income households and one in five older Australians admits to having no savings, despite a substantial portion (close to one third) indicating that current economic conditions are refocusing their attention towards saving.

Those who are very concerned about their financial situation – age/income

According to illion CEO, Gareth Jones, some vulnerable demographics are facing significant financial pressures.

"Our latest research clearly demonstrates that consumers are worried about their financial position. This is partly symptomatic of lingering pessimism from the global financial crisis however, for certain demographics it reflects the reality that households are living hand-to-mouth; with very little savings buffer should unforeseen circumstances occur. So while national household savings levels are at a 20-year high, it is clear that not all consumers are in a position to put money aside.

"For the older demographic, concern over finances in part reflects the ongoing fallout from the global financial crisis and its impact on superannuation."

Australians’ plans for spending and credit access are reflective of financial concerns, with more than half of all consumers (53%), including 56 per cent of low-income households, less likely to spend money on entertainment and other non-essentials than they were 12 months ago. Likewise, 40 per cent of consumers are less inclined to use existing credit to buy non-essential items, a figure which rises to 48 per cent for low-income households. Expectations for new credit access has also fallen, down five percentage points to just 15 per cent since the March quarter.

Discretionary spending plans compared with 12 months ago

"Ten to 15 years ago consumers were more comfortable living with a lower savings to debt ratio. However, continued global economic uncertainty is weighing on Australian households and dissuading discretionary spending, credit usage and significant investments such as buying a property," said Mr Siddique.

Further demonstrating the difficulties faced by certain demographics, 40 per cent of low-income households expect to rely on existing credit sources to cover costs – the same demographic also anticipates difficulty meeting current credit commitments. Likewise, 28 per cent of 50-64 year-olds expect they will need to rely on credit to cover expenses, while 41 per cent anticipate difficulty meeting existing credit obligations.

Reliance on credit among older Australians comes as one third of consumers aged 50-64 anticipate rising household debt in the coming months, up from 26 per cent during the March quarter. Low-income earners are similarly expecting rising debt levels; 34 per cent compared with 24 per cent of middle-income earners.