Pandemic-driven savings have helped improve financial wellbeing

The median savings balance of Australians has soared 42 per cent compared to before the pandemic.

Australians’ financial wellbeing remains higher than it was pre-pandemic despite dipping late last year, according to research from the Melbourne Institute and Commonwealth Bank.

The average observed financial wellbeing score, which combines five major indicators of financial wellbeing, was 49.9 out of 100 in December 2021, down from 50.7 in December 2020 but higher than the score of 47.5 recorded before the pandemic in December 2019.

The Melbourne Institute and CBA said this was due in part to a 42 per cent increase in the median savings balance over the past two years.

“These increased savings represent Australians hedging against uncertainties – uncertainties related to COVID-19, as well as rising inflation and returns on savings, both of which may make longer term impacts on people’s financial wellbeing,” said Professor John de New from the Melbourne Institute.

Median annual inflows and income were found to have risen by $1,600 compared to a year ago; however, an even greater rise of $3,600 was recorded for outflows and expenditure.

The proportion of Aussies consistently spending at high levels was also found to have increased by 6 percentage points.

“The data shows Australians started to spend more towards the second half of the year – likely due to pent up demand from earlier lockdowns,” said Professor de New.

“While this contributed to the slight year-on-year decline in financial wellbeing, the increased spending speaks to the high consumer confidence reported at the end of last year.”

The higher level of outflows and expenditure did not lead to a greater proportion of the population experiencing severe payment problems, which remained stable.

However, the number of Australians who were deemed to be “having trouble” or “just coping” in terms of their financial wellbeing rose by 1.1 percentage points versus December 2020.

There were 36.9 per cent found to be “getting by”, while 13.7 per cent were “doing great”.

“Despite the hardships of the pandemic, it is encouraging the research suggests the majority of Australians have better financial wellbeing than two years ago,” said Commonwealth Bank head of financial wellbeing Ben Grauer.

“A range of macro and micro economic factors, such as government support, and the ability to access financial support, such as deferring loans and small businesses accessing reduced lending rates, can all help to explain this.”

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Article courtesy of Nestegg


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