Australians’ savings drop as more struggle to pay rent

Australians’ saving levels have fallen to their lowest level since March 2020, according to new research by Finder.

Finder’s Consumer Sentiment Tracker (CST) survey revealed more Australians are struggling to pay rent as Sydney’s lockdown lingers, with cash savings seeing a sharp decline.

Each quarter, Finder analyses its most recent data to uncover the trends underpinning the financial, mental and physical health of Australian households.

CASH SAVINGS SEE A DIP

While many Australians started saving more money during the pandemic last year, average monthly cash savings have declined through the June quarter this year.

After peaking at $953 in February, the figure remained at about $800 to $900, before falling to $703 in June, which its lowest level since March 2020.

Finder’s head of consumer research Graham Cooke said the trend could be indicative of increased consumer confidence following last year’s recession, leading to increased spending. 

“It’s also possible the housing market boom has led more Australians to take on mortgages, leaving less money available for saving,” Mr Cooke said.

“However, this is a slightly disappointing result – I would have liked to see the increasing savings trend stick. 

“This pandemic has demonstrated more than anything the necessity of having a financial safety net.”

Eight out of the 10 economists surveyed believed the downward trend in savings will continue.

AUSTRALIAN WORKERS NOT HOPEFUL ABOUT PAY RISES

The percentage of Australians expecting a pay rise has once again dropped after its significant recovery earlier this year. 

After peaking in April, where those expecting a pay rise hit 56 per cent, the index has since dropped, reaching 42 per cent in June.

The Wage Price Index increased by 0.6 per cent between December 2020 and March 2021. This is equivalent to a 1.5 per cent year-on-year increase.

Mr Cooke explained the drop in pay rise expectation is beaten only by the drop between March and April 2020.

“While the first drop was caused by widespread lockdowns and economic uncertainty, the reason behind this recent dip is unclear, as it happened just before the most recent COVID outbreak.  Some economists have the opposite view,” Mr Cooke said.

Bendigo Bank Head of Economic and Market Research David Robertson said that tighter labour markets should help in driving wages growth up two per cent, and hopefully higher through 2022.

Griffith University International Economics Professor Tony Makin concurred, saying the shortage of staff in industries previously reliant on foreign students and workers on temporary visas will put upward pressure on wages in sectors such as fruit picking, hospitality, and tourism. 

However not all economists agreed.

Wealth Within Chief Analyst Dale Gillham said while there are more jobs being advertised, many areas are having trouble filling positions.

“I do not see any impact job mobility will have (on wages),” Mr Gillham said. 

MORE AUSTRALIANS STRUGGLE WITH RENT AND MORTGAGE

The number of Australians who say they struggle to pay their rent or mortgage payments is on the rise. 

After hitting a low of 23 per cent in July 2020, this figure has been rising.

It peaked at 33 per cent in May before settling at 31 per cent in June.

Mr Cooke said it will be interesting to see how the national stress metric behaves in the coming months, with swift lockdowns and somewhat unclear support available across the country.

“Australia’s financial stress regarding rent and mortgage payments has previously been going in the opposite direction than one might expect. As COVID payments kicked in during initial lockdowns, stress went down,” he said.

“This shows that the government payments were effective in relieving some of the financial pressure resulting from the first lockdowns – it remains to be seen what steps will be needed to help during this current one.”

Laing + Simmons Managing Director Leanne Pilkington said that home loan stress is typically a result of buyers over-extending themselves or an unexpected change of circumstances. 

“As long as due diligence is undertaken, buyers can be cautiously optimistic,” she said.

However some economists exhibited concern towards government schemes allowing consumers to purchase a property with as little as two per cent deposit.

AMP Capital Chief Economist Shane Oliver said a 98 per cent loan to valuation ratio implies a greater risk that the borrower will at some point face debt servicing problems.