Plummeting house prices have done little to dent the financial comfort of most Australians and in fact may have helped narrow the financial inequality gap between our richest and poorest.
- Household Comfort report finds proportion of Australians feeling financially secure has risen
- Vast majority surveyed believe house prices won’t keep falling
- Income increases not felt across the board, casual workers report wage losses
That’s the key finding of ME Bank’s latest “financial comfort” report, which surveyed 1,500 people about how they perceived their own finances in the second half of 2018.
The 15th biannual report found income gains, easing living costs and increased savings were key drivers in households’ feeling more comfortable.
“Most households are well supported by both [subdued] wage gains and stronger jobs growth — albeit underemployment remains high,” the report reads.
House prices have fallen dramatically in some parts of the country lately, with drops of nearly 10 per cent felt in Sydney and Melbourne over the past year alone.
And the fall appears to be picking up speed in the new year, dropping an average of 1 per cent last month nationally.
Despite this, the vast majority of residential property owners surveyed by ME Bank were bullish about their own fortunes.
Only 13 per cent of homeowners and 11 per cent of investors expected the value of their properties to fall this year.
Economist and report co-author Jeff Oughton said the recent “correction” in house prices had been felt most keenly at the top end of the market.
“We’ve seen a correction for wealthier, older property-owning Australians who’ve been riding the hot property and bull share markets for much of the past seven years,” he said.
“Middle and lower-income households have begun to benefit from an easing in living cost pressures and income gains.
“Together the changes have helped bridge the gap in financial inequality that had been widening.”
More broadly, the report found the gap in financial comfort between high and average-income households had also closed.
It found the financial comfort of those earning more than $200,000 a year fell by 6 per cent to 6.79 out of 10, while those earning $75,000 to $100,000 reported their financial comfort had increased by 7 per cent to 5.87.
The overall index across all wages rose by 2 per cent to 5.56 out of 10 — higher than any of the past five surveys.
Not an even spread
Despite the average rise in financial comfort, an increase in household income was not felt across the board.
The report found full-time workers were the most likely to report an income boost over the last year, followed by the self-employed, while casual employees reported the highest level of income reduction.
Australians are also tightening their belts and saving more, suggesting a level of anxiety about the state of the economy.
Mr Oughton said a number of factors could explain this caution.
“We’re still seeing some geopolitical effects, with households concerned about the world economy up two points to 29 per cent,” he said.
“Combined with domestic property and share market corrections, many Australians are beginning to tighten their belts to build financial resiliency.
“If above-average cash savings and reduced spending behaviour continues during 2019 it could significantly slow economic growth and in turn may lead to smaller job and income gains.”