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New research published by Commonwealth Bank (CBA) and the Melbourne Institute of Applied Economic and Social Research (Melbourne Institute) suggests that Australia’s average financial wellbeing has slightly declined over two years yet remains higher than it was prior to COVID-19.
The data, which is derived from the Australian Consumer Financial Wellbeing Report’s December 2021 quarterly update, notes that, during this period, the average observed financial wellbeing score was 49.9 out of 100 – a year-on-year drop of 80 basis points.
However, compared to the same time two years ago, this figure is an increase of 2.4 per cent.
As per the major bank, the data is based on 12 months worth of the transaction and account data for over five million CBA customers.
Further, the report’s methodology draws on the Melbourne Institute’s Observed Financial Wellbeing Scale, which incorporates five indicators of financial wellbeing, to produce a single score out of 100.
These indicators include a customer’s ability to cover monthly expenses; the monthly frequency of high-spending levels comparative to income; the frequency a customer had a low bank balance; the frequency a customer experienced payment problems; and saving levels compared to similarly-aged demographics.
The latest figures also note that more Australians in December 2021 were “having trouble” (21 per cent) than they were in December 2020 (19.2 per cent). However, this remains lower than it was in 2019 (22.9 per cent).
The report also notes that the median annual inflows and income increased by $1,600 alongside a $3,600 increase in the median outflows and expenditure.
However, savings were largely unaffected by this disparity, with the median annual savings balance having neither increased nor decreased in the year to December 2021.
Further, compared to the figures from the same time in 2019, this annual savings figure is 42 per cent higher.
Melbourne Institute’s Professor John de New said this increase in savings reflected how Australians were “hedging against uncertainties” such as COVID-19 and inflation – “both of which may make longer term impacts on people’s financial wellbeing”.
Speaking of the wider financial wellbeing figures, Mr de New noted that despite the increase in the experience of negative outcomes over 12 months, there were “more people doing better and less people doing worse compared to before the pandemic started”.
He later added: “The data shows Australians started to spend more towards the second half of the year – likely due to pent up demand from earlier lockdowns.
“While this contributed to the slight year-on-year decline in financial wellbeing, the increased spending speaks to the high consumer confidence reported at the end of last year.”
CBA head of financial wellbeing Ben Grauer said that, despite the COVID-19 pandemic, “it is encouraging the research suggests the majority of Australians have better financial wellbeing than two years ago”.
“A range of macro and micro economic factors, such as government support, and the ability to access financial support, such as deferring loans and small businesses accessing reduced lending rates, can all help to explain this,” Mr Grauer concluded.
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