Despite historically low interest rates, many Australian households are dangerously exposed to financial shocks, according to a new study.
These are the findings of the ING
Direct Household Financial Fitness Test, which measures financial fitness based on how well households would cope if the main income earner experienced unemployment and how quickly the household could pay off an unexpected bill of $10,000.
According to the report, half Australia’s households would face difficulties covering their living costs if the main income earner lost their job. Almost two out of five (37%) could only survive for one month or less if the main income earner lost their job and just under half (45%) of households would struggle to pay off an unexpected expense of $10,000 within three months.
“These findings highlight the importance of building a pool of savings that can provide a buffer in financial emergencies.” John Arnott, executive director, customers, ING
The findings come as low interest rates push the ING
Direct Financial Wellbeing Index to the highest level since tracking began in the first quarter of 2010. According to the index, the vast majority of households (95%) say they are comfortable with their mortgage and 84% say they are comfortable with household income.
“While low mortgage rates are good for households, homebuyers need to be mindful that rates can rise,” Arnott said.