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The biennial AMP Financial Wellness Report has revealed a startling statistic that indicated that financial stress levels in Australia now sit at their highest point in 10 years.
According to AMP, 66 per cent of Australians indicated that they are feeling some degree of financial stress (either mild, moderate, or severe), with 52 per cent believing that cost-of-living pressures will rise significantly over the next two years, leaving many to focus on the short term.
The report observed some common practices and priorities that are shaping the budgets and mindsets of consumers, particularly around mortgage repayments.
It found that people have been prioritising making their mortgage repayments, with 88 per cent of respondents saying they never or rarely miss a mortgage payment, 10 per cent said it happens occasionally, and 8 per cent said it happens frequently.
The report suggested that the increase in mortgage and rental costs outpacing increased incomes has resulted in these costs “absorbing more household budget than they once were”.
It said: “The impact can be seen in the case of the 3.3 million mortgage holders, where 30 per cent say they have had to cut back on other expenses to afford increased repayments.
“Expected interest rate declines will also come as welcome relief for the 31.5 per cent who said mortgage repayments would no longer be sustainable if rates kept rising.”
As a result, meeting short-term expenses has resulted in one in three Australians never or rarely planning for their financial future and only 29 per cent occasionally doing so. The report also found that this may be why most mortgage holders are not paying off their mortgages faster than needed or saving money for retirement (only 32 per cent have made voluntary super contributions over the last year).
In the event of having extra funds, however, 70 per cent of people put those funds towards either their mortgage, super, or both.
Alexis George, CEO of AMP, said: “Every household in Australia is navigating higher costs – from mortgage and rent repayments to energy prices and groceries. The fact that most are covering these expenses speaks to the broader economic resilience we are fortunate enough to have as Australians.”
AMP Bank group executive Sean O’Malley said it’s clear that Australians “aren’t feeling secure with their finances”, something that is unsurprising given housing affordability and cost-of-living hurdles.
“And while the research tells us that most are meeting their mortgage repayments, we know that savings rates are down and many are cutting back expenditure on household basics such as groceries, and other more discretionary items such as streaming services and holidays,” O’Malley said.
“Amid these cutbacks, it’s also evident that many aren’t taking advantage of the support available to them, with a tendency to bottle up their financial worries, in turn impacting their mental wellbeing.”
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