Financial wellbeing at record high: CBA

The Commonwealth Bank of Australia’s (CBA) latest Australian Consumer Financial Wellbeing report has shown that over the 12 months to March 2021, Australians’ financial wellbeing spiked by 7.8 per cent to a new record score of 51.1 (on a scale of zero to 100).

According to the major bank, this represents the highest level and largest year-on-year increase ever recorded since the financial wellbeing score was first calculated in 2017.

Furthermore, the report highlighted that customers particularly benefited from record-low interest rates, with the number of home owners with a mortgage at the highest level in more than 25 years, while the number of outright home owners (without a mortgage) is the lowest it has been over that same period.

The report is based on the Melbourne Institute’s Observed Financial Wellbeing Scale, and includes five components that measure financial wellbeing, showing the extent to which Australians have financial freedom, control and security, and can meet their ongoing obligations immediately and into the future.

The report – which is compiled based on the data of over 5 million CBA customers over the 12 months to March 2021 – showed that over the past 12 months, 17 per cent fewer customers consistently spent at “high levels”, 16 per cent fewer customers “frequently” live paycheque to paycheque, 10 per cent fewer customers have an insufficient safety net for immediate or unforeseen expenses 75 per cent of the days in the past year, and 18 per cent fewer customers have “below average savings”.

There was also a 5.5 percentage point reduction in customers “having trouble” or “just coping”.

The report has attributed the “unexpected” improvement in financial wellbeing since the onset of the COVID-19 crisis to the provision of targeted and swift government fiscal policy intervention, expansionary monetary policy, the ability for borrowers to deferral loan repayments, emergency access to superannuation, and changes to consumer spending patterns amid lockdowns and economic uncertainty.

Victorians record highest rise in financial wellbeing

Across the states, the highest average levels of financial wellbeing were found to be in the ACT at 53.8 and Victoria at 53.7, while the lowest were found in the Northern Territory (46.9) and Queensland (48.1).

Despite Victoria being hit with approximately 70.0 per cent of all COVID-19 cases in Australia and three government-mandated lockdowns, the financial wellbeing of Victorians increased more than any other state or territory between March 2020 and March 2021, according to CBA’s report.

It explained that Victoria offered additional support (excluding the support offered at a national level), including $450 COVID-19 test isolation payments, a one-off $1,500 pandemic leave disaster payment, food relief, and a one-off rent relief grant of $3,000.

The financial wellbeing of those aged between 30 and 39 (up 4 points or 8.9 per cent) and 40 and 49 (up 4.5 points or 10.0 per cent) increased the most, while the smallest increases were found among those aged over 80 (3 points or 6.9 per cent).

The report also said that middle-aged Australians benefited the most from lower mortgage repayments due to record-low interest rates and positive wealth gained due to higher property prices.

It added that older Australians tend to own their homes outright and benefit primarily through higher wealth due to increased property prices, and less due to reduced interest rates.

Commenting on the findings, CBA executive manager financial wellbeing Ben Grauer said that while some customers could be struggling or worse off from the COVID-19 crisis, many customers’ financial wellbeing has improved, and feel more financially secure. He added that increased savings, decreased spending, and paying down debt have been recurring themes during the pandemic.

“Our research shows customers’ financial wellbeing is more closely linked to their financial behaviours, rather than how financially knowledgeable they are or how much they earn,” Mr Grauer said.

Professor John de New from the Melbourne Institute: Applied Economic and Social Research at the University of Melbourne noted that there was a 6.5 per cent increase in those considered to be “getting by” in the report, and a 28.3 per cent increase in those who were “doing great” (the top two categories in the financial wellbeing scale).

“With total employment and other macro-economic indicators almost back to their pre-pandemic levels, this increase in savings buffer, prudent behaviour and associated improvement in financial wellbeing will serve Australians well to deal with future challenges as the economy continues its recovery,” Professor de New said.

[Related: Home buying intentions jump sharply: CBA]

Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.

Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.