Cost of Living Pressures

Your Financial Wellness (YFW) Co-Founder and Chief Executive Alex Hassall joins Dave ahead of the RBA announcement on interest rates.

Research shows cost of living pressures starting to bite 

• Research from Your Financial Wellness finds the struggle to pay the mortgage is already real 
• Younger Australians worry about regular expenses and find it difficult to meet them 
• Many Australians aren’t confident of coping in a financial emergency 
• Almost half (46%) of Australians experience some form of financial stress with 27% reported high or overwhelming financial stress.  

Just a week before the next RBA decision on interest rates, cost of living pressures are starting to bite, with independent research showing there’s already concern about meeting mortgage repayments and paying for regular household expenses like petrol bills.

Research from Your Financial Wellness has found more than half of 20–39-year-olds aren’t confident in a financial emergency.

Of concern is that mortgage stress, as defined by more than 30% of income being required to repay a mortgage, will rise from 27% to 42% of respondents if interest rates were to rise by two percent.

Your Financial Wellness (YFW) Co-Founder and Chief Executive Alex Hassall said the research shows the cost of living debate could be central to many discussions in 2022.

“Our latest analysis suggests that the issue of cost of living will be front and centre next year.

“We can see from some of the analysis we have already done that many Australian households are increasingly paying more attention to their household budgets.

“Affordability is becoming a big issue and it’s not just housing.

“We have found a strong correlation between those who have achieved the dream of home ownership and higher financial wellness and less stress, compared to those still battling to buy their first home.

“We also see a powerful connection between higher levels of financial literacy and financial wellness, because the more financially aware and informed a person is, the more likely they are to be more financially secure and be less stressed about their finances.

“As we head towards a Federal Election, issues like housing affordability, the cost of living and financial literacy are major talking points with policy opportunities for the major political parties.”

YFW is a Sydney-based data analytics and financial wellness platform providing cloud-based financial literacy and customer Insights to Australian financial institutions.

Earlier this year Your Financial Wellness released independent research from 3000 Australians who answered 100 questions relating to their financial aspirations and socio economic situation.

The research found almost half (46%) of Australians experience some form of financial stress, more than half (51%) sometimes worry about meeting normal monthly expenses, one in five (21%) cannot often afford to eat out or go to the movies, and 27% reported high or overwhelming financial stress. Women experienced higher levels of financial stress compared to men (29% to 19%).

The research is underpinned by the YFW Index which has been successfully validated by the Centre for Social Impact at the University of NSW. The results shows that the average financial wellness score in Australia is 6.4 out of ten, with a score of 5 or below showing significant levels of financial stress.

“As affordability and cost of living loom as a hot topic for next year, what is really cutting through is the very strong impact of home ownership on financial wellness.

“Those who owned their home reported a financial wellness score of 7.9 compared to 5.1 for renters.

“And with price pressure on households increasing due to emerging factors such as higher petrol prices, what was sobering was that 40% of respondents have less than a month’s salary in savings.

“Measures that assist housing affordability and encourage saving will be front of mind for policymakers in the year ahead.”