Australians are increasingly anxious as financial stress intensifies

GREG WOOD/AFP/Getty Images
  • Australians are increasingly anxious about what the future holds.
  • The catalysts are combination of high levels of indebtedness, falling household wealth and sluggish income growth.
  • A greater number of Australians are reporting being in financial hardship.
  • Spending on non-essential goods and services is declining as a result.

Australians are becoming increasingly anxious about what the future holds, driven by a combination of high levels of indebtedness, falling household wealth and sluggish income growth.

Worryingly for the broader economy, there’s growing evidence to suggest that’s keeping wallets and purses shut.

The National Australia Bank’s (NAB) Consumer Anxiety Index spiked to 62.0 points in late 2018, leaving it at the highest level in over three years.

A higher reading indicates higher anxiety levels.

NAB

“Anxiety increased most over the cost of living, and despite a healthy labour market, concerns over job security also climbed to its highest level since mid-2016”,” said Alan Oster, Chief Economist at the NAB.

“In terms of household finances, retirement remains the big worry, followed by providing for the family’s future, raising $2,000 for an emergency, and medical and healthcare costs.

“Against this background, almost four in 10 Australians said they had experienced some form of financial hardship last quarter, the highest in two years.”

The NAB said this was most prevalent among women, 18-29 year-olds and for low income earning households. It also noted that being unable to pay a bill remained the most common cause of hardship.

NAB

Unsurprisingly, that mindset is now starting translate to reduced spending on non-essential goods and services, at least according to survey respondents.

“This mainly reflected a sharp rise in the net number of consumers that said they had cut back on travel, eating out, charitable donations, entertainment and home improvements,” Oster said.

“Spending on ‘essentials’ is still being mainly driven by utilities, but less so than in the previous quarter.”

NAB

The results from the latest survey add to a string of unsettling indicators on the health of household spending.

In December, retail sales fell by 0.4%, leaving price-adjusted turnover for the quarter at just 0.1%. New car sales have also fallen sharply in recent months while consumer sentiment, as measured by Westpac Bank, fell to multi-year lows in January.

The deterioration in those data points likely explains why the Reserve Bank of Australia has trimmed its expectations for household consumption and broader economic growth over the next couple of years.

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