Powered by momentummedia
nestegg logo
Powered by momentummedia
nestegg logo
nestegg logo

 

 

Invest

Drought, fires ruin regional financial comfort

  • February 17 2020
  • Share

Invest

Drought, fires ruin regional financial comfort

By Cameron Micallef
February 17 2020

Australians living in metropolitan areas are nearing a record high for financial comfort, while those living regionally are approaching record lows, according to new research.

Bushfire

Drought, fires ruin regional financial comfort

author image
  • February 17 2020
  • Share

Australians living in metropolitan areas are nearing a record high for financial comfort, while those living regionally are approaching record lows, according to new research.

Bushfire

A report released by ME Bank showed that the divide in financial comfort between regional and metropolitan households had now reached a record 13 per cent, almost twice the historical average of 7 per cent. 

In a conversation with nestegg, ME consulting economist Jeff Oughton explained why there’s a divide between metro and rural stress, albeit as the majority of debt holders are feeling the pinch. 

“When it comes to the level of savings, almost 50 per cent of people spend all their income each week, so they don’t have much savings on a weekly basis. They are not confident they could raise money for a financial emergency,” Mr Oughton said.

The economist highlighted the two natural disasters that have hit Australia – with the drought and bushfires forcing regional Australians to spend their savings.

Advertisement
Advertisement

“The sharp fall in financial comfort in regional areas is likely a result of ongoing drought and recent bushfire catastrophes, which have significantly lowered already low levels of financial comfort. ‘Comfort with cash savings’ fell 9 per cent, and the ‘ability to deal with financial emergencies’ fell 7 per cent, while long-term retirement comfort deteriorated, with ‘anticipated standard of living in retirement’ down 7 per cent.”

While regional Australians are suffering from financial stress, metropolitan Australians are able to take advantage of cheaper interest rates, allowing them to feel more financial comfort. 

“In contrast, the improvement in the financial comfort of metropolitan households reflected significant gains in all key drivers, with record-high levels of comfort approached in Sydney (up 1 per cent to 5.94), Melbourne (up 3 per cent to 5.91) and Brisbane (up 10 per cent to 5.82),” Mr Oughton explained.

The report also highlighted the impact of record-low interest rates with young singles and couples being relatively comfortable paying down debts.

Almost 60 per cent of property investors with debt are reportedly to benefit the most from record-low official interest rates – arguably reflecting the relatively high gearing of residential property investors, especially those with both home and investment mortgages.

For households who are reportedly “worse off” from the record-low official rate, 33 per cent own their home, 13 per cent are paying off a mortgage on their home and 22 per cent are renting. By life stage, about 40 per cent of “empty nesters” and “retirees” are reportedly “worse off”.

Over 30 per cent of households with lower income (less than $40,000 per annum) are reportedly “worse off”. 

In contrast, only 13 per cent with a mortgage on their home and/or investment property were reportedly “worse off”, with about the same proportion (14 per cent) of households with high incomes (over $100,000 per annum).

The notable falls in financial comfort across regional Australia dampened an overall rise in national financial comfort, with ME Bank’s overall Household Financial Comfort Index improving by 2 per cent to 5.59 out of 10 during the six months to December 2019. 

Across the 11 key drivers that make up the index, 10 of the drivers improved – with notable improvements in household “comfort with debt” and recent “changes to their financial situation”, the report concluded.

Drought, fires ruin regional financial comfort
Bushfire
nestegg logo

Forward this article to a friend. Follow us on Linkedin. Join us on Facebook. Find us on Twitter for the latest updates
Rate the article

About the author

author image

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

more on this topic

more on this topic

From the web

Recommended by Spike Native Network

More articles

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.