Financial wellbeing, or the lack of it, affects everybody. At the roll of a dice, anyone can have a financial hiccup that will impact their lives.
Ninety percent of the nearly 55,000 respondents to the ABC's Australia Talks National Survey, rated household debt as a problem for the nation. On an individual level, 37% are struggling to pay off their own debts, with almost half of millenials reporting that debt is a problem for them personally.
Our overall wellbeing is being negatively affected by our relationship with money. Money worries don’t only affect financial health; as one of the single biggest causes of stress, it can impact mental health and physical health too, if left unchecked1.
A significant number of serious monetary challenges will continue to face Australians in 2020.
1. Slow wage growth
Australian workers are currently getting the smallest pay rises since WWII2. A range of measures show a significant slowing in wage growth in Australia over the past five years. The Wage Price Index (WPI) grew at an annual average of 2.2% in the five years to December 2018, which compares with average annual growth of 3.3% in the previous five years to December 2013.
2. Working poor
Australia has a large population of working poor. The ACOSS/UNSW Poverty in Australia 2018 Report3 found that of the 3 million Australians living below the poverty line (generally defined as 50% of median household income), nearly 1 million of these rely on wages as their main source of income. Particularly vulnerable are the high percentage of sole parent families living in poverty.
3. Higher borrowing
To deal with the issues of rising costs and slow wage growth, employees are turning to more borrowing. Australians have the world's second-largest household debts, at around 120% of GDP (everything the nation produces in a year)4. We also have nearly twice as much debt as income5, as the level of household debt to income exceed 190% for the first time in September 2019, according to the Reserve Bank of Australia.
4. Lower home ownership
High real house price growth relative to income remains a barrier to home ownership, despite current low interest rates. The level of housing debt to income has jumped to an all-time high of more than 140%6. Professor Roger Wilkins, Deputy Director, HILDA, says housing debt has more than doubled in real terms since 2001. 'It's now averaging around about $350,000 for those with a mortgage debt, compared with around about $160,000 in 2001'.
5. Victims of scamming
A lack of financial education and awareness is compounding people’s abilities to keep their money out of the hands of scammers. According to Westpac’s State of Scams report, nearly one in 10 Australian’s have been scammed in the past year, suffering an average loss of $12,0007.
What can we do about it?
There’s no simple answer to the problem. But, if you can learn how to do more with your money, you’ll be in a much better position to navigate any financial hiccups.
6 Financial Review, 27 September 2019, 'Australians have nearly twice as much debt as income - 27 September 2019