• 24/07/2024

Household financial comfort dragged down by residential property price falls and weakening labour market: report

The Real Estate Conversation| 12 August 2019


Financial comfort in Australian households has dipped following residential property price falls and a weakening of the labour market, new research from ME Bank has revealed.

The institution’s Household Financial Comfort Report has indicated people have been feeling worse about their net wealth, jobs, income and living expenses in the six months to June, with net wealth, in particular, seeing the largest drop, falling 3 per cent to 5.54 out of 10.

Consulting Economist for ME, Jeff Oughton, said that despite remaining a little above the Report’s seven- year average, financial comfort across most of the 11 drivers that make up the Index fell.

“The financial comfort of Australian households eased over the past six months, with a significant fall seen in comfort with wealth,” he said.

“Despite lower mortgage loan rates, expected cuts in personal income tax and higher local and global equity prices, this is largely a consequence of continued decreases in the value of residential property in many parts of Australia.

“Comfort with wealth would have fallen much more if it wasn’t for record bond prices and rebounding share markets as well as the Government’s retention of negative gearing on investment properties and cash refunds for franking credits that saw household comfort with investments increase.” 

According to the report, financial comfort with investments (in financial assets, such as shares and super, and property) was the only driver across the index to improve (up only 1 per cent), but was largely accrued by households with high incomes.

Households with incomes of $200k+ per annum and large superannuation balances (above $1 million) reported increases to overall financial comfort by 10 per cent to 7.45 and 11 per cent to 8.3, respectively, during the six months to June 2019. 

A weakening labour market and subdued income growth weigh on comfort 

The report showed financial comfort among households also eased as a consequence of a weakening job market, which resulted in subdued wage growth, falling comfort with income and high levels of both underemployment and job insecurity. 

In particular, financial comfort among working Australians significantly deteriorated, with full-time workers recording a 3 per cent decrease to 5.86, part-time workers decreasing 4 per cent to 5.1, casual workers decreasing 1 per cent to 5.02 and self-employed workers down 3 per cent to 5.57. 

Mr Oughton said it was clear from there were increased concerns around job availability and underemployment.

“The number of workers who felt it would be difficult to find a new job increased by 16 per cent to over 1 in 2 employees, which is the highest recorded since late 2016,” he said.

In June 2019, 35 per cent of part-time and casual workers said they would prefer to work more hours – seeking an additional 23 hours per week.

Meanwhile, 26 per cent of all workers said they felt insecure in their current job. 

Households’ comfort with their incomes also fell by 1 per cent to 5.69 in the latest survey.

Only 36 per cent of Australian households reported an increase in their annual income during 2018/19, falling 2 points from December 2018, and there were fewer income gains recorded across households in general.

Higher income households also continued to be much more likely to report increased incomes during the past year. 

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