Australians’ concern about not only their own financial circumstances, but global economic conditions, has “grown markedly” according to the third annual Financial Consciousness Index (FCI).
This year, 11.8m Australians indicated they are concerned about current economic conditions on the macro level – 5.7m more than in 2019. Additionally, 60% of those surveyed expressed “extreme concern” towards global conditions, compared to just 31% last year.
The Index, commissioned by comparethemarket.com.au and developed by Deloitte Access Economics, revealed that this negative global outlook is impacting people’s confidence in their personal financial situations.
Rising concern led to half of those surveyed (57%) believing their finances will not have materially improved by May 2021.
David Ruddiman, general manager of banking at comparethemarket.com.au, explained that many Australians went into the pandemic on shaky economic ground given Australia has been at near-recession for some time, with stagnant wages and rising cost of living.
“With unemployment figures on the rise and government benefits soon to be slashed, many are feeling hopeless about their financial future,” Ruddiman continued.
“The second wave of COVID-19 has created even greater economic uncertainty with no clear end in sight so, understandably, confidence has significantly declined.”
Two-thirds of the study’s respondents communicated they doubt their income and their ability to pay bills will improve by May next year, while nearly half believe the value of their home will fail to improve by the same date.
The findings also showed that 11% of Australians expect their debt to increase by May 2021; however, notably, the responses seemed to suggest people are becoming more comfortable with said debt.
“This could indicate that many aren’t planning to proactively pay it down, likely due to interest rates being at record lows. In these circumstances, people tend to hold onto cash rather than pay off their debts, which are yielding low interest,” Ruddiman explained.
“Meanwhile, others are incurring more debt as they think it is a favourable time to borrow.
“Australians must understand the impacts this may have down the track, including developing bad savings and spending habits and living beyond one’s means. Those who do not have a strong understanding of financial products may not realise that low interest rates are not consistent across all products. For instance, credit cards will still incur around 20 per cent interest. This could put Australians in a worse-off position if they are already grappling with debt issues,” he concluded.