Nearly 80 Percent of Australian Households Grapple With ‘Extreme’ Financial Stress: Report

The data suggests that families are wrestling with the burdens of rising expenses, prompting a widespread reevaluation of spending habits.
Nearly 80 Percent of Australian Households Grapple With ‘Extreme’ Financial Stress: Report
A woman pays a fruit vendor in a market in Melbourne, Australia, on July 23, 2013. (Scott Barbour/Getty Images)
Isabella Rayner
About 80 percent of Australian households are under “extreme” financial stress, according to a new report.
In November, Finder’s Cost of Living Pressure Gauge reached an “extreme” level of 79 percent, up from 45 percent in November 2020. 
It means 78 percent of Australians feel significant financial stress with 37 percent of homeowners and 44 percent of renters struggling to pay for a roof over their head. 
Finder’s head of consumer research, Graham Cooke, said households are under the pump amid the cost of living crisis.
“Our gauge’s results show a stark reality—rising costs, housing stress and the reliance on credit cards for financial management are putting millions under the pump,” he said. 
He added that stretched budgets make it hard for households to save enough of a financial buffer against additional pressure.

Households that are trying to save money were advised to find ways to cut back without sacrificing essential needs.

“Recognise areas of spending that don’t provide significant value and consider cancelling or downgrading,” Mr. Cooke said. 
“Whether it’s refinancing or switching energy providers, there are big savings to be had by shopping around and comparing your options.”
The report combined data from Finder’s Consumer Sentiment Tracker (CST) and the Reserve Bank of Australia (RBA).
The pressure reading considers housing stress, salary expectations, household debt, financial stress, household savings, holiday plans, credit card spending, the RBA cash rate target, property prices, and inflation.

Highest Cash Rate Since 2011

Australians are feeling financial pressure as the RBA’s cash rate target hit 4.35 percent, the highest since 2011 and up from the historic low of 0.1 percent.

The 13th interest rate hike pushed up monthly repayments for mortgage holders, stretching many household budgets thin.
Meanwhile, rent prices rose 6.6 percent in a year, while electricity prices surged 10.1 percent in a year.

At the same time, annual inflation is at 5.4 percent as of September, down from a high of 7.8 percent in the quarter to December 2022.

Fuel prices also went up 8.6 percent in the 12 months to October, an improvement on the 19.7 percent surge in the year up to September.
The RBA left its cash rate unchanged at 4.35 percent on Dec. 5. 
It was widely expected to keep rates on hold after a surprisingly weaker-than-expected monthly inflation reading of 4.9 percent.
A Reuters poll last week found 28 of 30 economists expected the central bank to keep the cash rate steady.
Australia’s big four banks were among those tipping no change.
Westpac economists mentioned there’s insufficient proof of an inflation rise in economic data since November to spur the central bank into action.
Meanwhile, ANZ senior economist Catherine Birch maintained the central bank would hold interest rates. 
“We continue to see the RBA on hold in December,” she said in a research note to investors.

Supermarkets Accused of Profiting Amid Cost of Living Crisis

Despite declining inflation, major Australian supermarkets are facing accusations of capitalising on the cost of living crisis.

The Australian Greens party has decided to initiate a senate inquiry into the alleged price-gouging practices of leading supermarkets, Coles and Woolworths.

The inquiry, dependant on sufficient support, seeks to examine how market concentration affects food prices and evaluate the pricing strategies of the two major chains.

The inquiry will focus on essential item price growth, the legitimacy of supermarket discounts, and changes in profits during economic challenges.

Greens Senator Nick McKim said Coles and Woolworths, holding a combined 65 percent of Australia’s grocery market, were profiting significantly during the cosy of living crisis by overcharging consumers.

“Coles and Woolworths are making billions in profits because they feel that they can overcharge people without repercussions. It needs to end,” he said in a statement.

It follows Coles’ and Woolworths’ reporting profit increases for the 2022-2023 financial year.

Woolworths’ net profit increased from $1.55 billion (US$1.03 billion) to $1.62 billion, and Coles’ rose by 4.8 percent to $1.10 billion during the year.

In response to the accusation of price gouging, Coles highlighted the impact of rising operating costs and increased supplier requests, stating they face challenges similar to those experienced by their suppliers.

The supermarket noted the need to balance various cost factors in their pricing decisions.

How Will the Nation Respond?

Prime Minister Anthony Albanese says cost-of-living is now the government’s top priority.
In a keynote address to the Economic and Social Outlook Conference in Melbourne on Nov. 2, Mr. Albanese touched on a number of his short-term aspirations for the economy.

“Our government understands the cost of living is the number one pressure on Australian families,” the prime minister said.

“Our responsible approach to both revenue and spending has turned the $78 billion deficit we inherited into a $22 billion surplus. The treasurer, the finance minister, and all of us are proud of that unprecedented turnaround and pleased to have delivered the first budget surplus in 15 years.

“But we did not pursue a surplus for the sake of it. We know a stronger Budget position serves as an important buffer against international shocks and helps put downward pressure on inflation.”

Monica O'Shea and Alfred Bui contributed to this article.