2 in 3 households said restrictions and Government stimulus resulted in more money in their hip pocket: financial adviser urges Aussies to save now while they still can

Posted by Media Release Agency on 8th December 2020

Government stimulus measures have helped keep many Aussies afloat this year: the JobKeeper payment saved 700,000 from unemployment[1] and 800,000 mortgagors deferred loan repayments.[2] Now, surprising new research reveals that 2 in 3 people have accumulated more money in their hip pocket this year, as a result of reduced spending, Government stimulus and loan repayment deferrals. A leading financial adviser is urging these Aussies to take advantage of their improved financial situations by continuing to save and pay off debt while they are still in the position to do so, before stimulus measures cease.

The findings come from a survey of an independent, nationally representative panel of 1013 Australians commissioned by financial information platform Money.com.au.

The survey asked respondents how their earnings between April and October this year compared with the same period last year – taking into account any JobKeeper, JobSeeker and superannuation income they drew. The findings were encouraging, with 21 per cent of respondents having earned more, 51 per cent earning the same, and just 28 per cent earning less than last year.

Licensed financial adviser and Money.com.au spokesperson Helen Baker, says: “These findings point to the unique characteristics of Australia’s workforce and the success of the Government’s financial support. Australia has a strong service-based corporate workforce that was able to continue working from home, while important industries such as construction, mining and public service continued operating, albeit with social restrictions. Some employees may also have initially experienced a reduction in income, which would have been offset by the introduction of JobKeeper and super withdrawals.”

Money.com.au then asked respondents whether they spent less on essential expenses or discretionary costs between April and October. Nearly three-quarters (73 per cent) spent less on expenses overall. Specifically, 58 per cent reduced their discretionary spending, and 32 per cent spent less on essentials. A higher proportion of respondents aged 18-30 (41 per cent) spent less on essential expenses, compared with 33 per cent of 31-50s and 23 per cent of over-65s. This may be due to the rise in young Aussies moving back home to live with family or negotiating lower rental payments with their landlord.

Finally, respondents were asked whether the balance between their income and spending since March resulted in more or less money in their wallets. It found that 60 per cent of respondents did, in fact, have more money to save or spend. A third (36 per cent) of respondents saved the additional funds, 14 per cent paid used it to pay off additional debts, and 11 per cent took advantage of the extra funds by spending it.

More full-time workers (67 per cent) saw the money in their hip pocket increase this year, compared with 52 per cent of the unemployed and 51 per cent of retirees. Many retirees, particularly those who are self-funded, were impacted by the instability of the stock market this year.

Helen adds: “Our results show that, overall, there has been a lot more caution around spending this year. This is understandable, as travel, entertainment, dining out, sport and other activities were off the cards for a significant portion of the year – but the benefits for households have been greater savings and debt repayments.

“With Government stimulus set to end next year, it would be wise for households to continue to be cautious with spending and focus more on saving well into the new year. I encourage households to create a spending and investment plan to determine their fixed expenses and discretionary costs against their income to see if they break even, have a portion left over for savings, or if they will be in the negative. Revisiting any debts and discussing refinancing with their bank or lender is also important to do now as it will be difficult to do in case of a job loss in 2021. Households would also be wise to avoid spending heavily this Christmas and accumulating credit card debt into the new year.”

[1] Reserve Bank of Australia, 2020 https://rba.gov.au/publications/rdp/2020/pdf/rdp2020-07.pdf

[2] Australian Banking Association, July 2020 https://www.ausbanking.org.au/banks-enter-phase-two-on-covid-19-deferred-loans/