Despite significant falls in residential property and share markets, Australia’s financial inequality gap has narrowed for the first time in seven years, as households start to feel better about finances.
Income gains, easing living costs, growing savings and reduced overspending were key drivers in households’ rising financial comfort, finds the ME Bank’s Household Financial Comfort Report.
Although it warns “belt-tightening” could be “a bellwether” for slowing economic growth.
Consulting economist Jeff Oughton says this is the first time since commencing the bi-annual survey ME has seen the comfort gap between property owners and renters compress.
“As well as (narrowing) between very high-income earners and other income brackets,” he said.
“We’ve seen a correction for wealthier, older property-owning Australians who’ve been riding the hot property and bull share markets for much of the past seven years, while middle and lower-income households have begun to benefit from an easing in living cost pressures and income gains.
In the six months to December 2018, the report’s overall household financial comfort Index increased by two per cent to 5.56 out of 10, higher than the past five surveys and above the historical average of 5.45 out of 10 since the survey began in October 2011.
Financial comfort up despite housing price falls
The latest Corelogic data show an almost 7 per cent drop in house prices nationally across capital cities in the 12 months to January, with Sydney leading the biggest decline at almost 10 per cent.
ME’s Report, which is based on a survey of 1500 Australian households, found it was having no notable negative impact on households’ comfort in those major capital cities and states, up about three per cent in Melbourne and down only one per cent in Sydney.
Financial comfort in Queensland also jumped to a record level of financial comfort in December last year – up eight per cent to 5.68 and surprisingly, the highest across Australia, due to broad-based improvements across all drivers of comfort.
“Cooling housing and share markets haven’t yet dented the financial outlook of most Australian households,” Oughton said.
“And many residential property owners remain positive: only 13 per cent of home owners and 11 per cent of investors expect the value of their properties to fall in 2019.”
