Australians could only last a month on their savings: survey

Only 40% of working Australians could last a month on savings if they lost their job, while 38% say they expect to use a credit card to pay bills in the next quarter, the latest Dun & Bradstreet Consumer Credit Expectations Survey reveals.

The survey also shows that 21% of Australians expect increased debt levels in the next few months, while 14% expecting to apply for a credit limit increase. About 32% of respondents said they will make a major purchase during the September quarter.

The results also show that middle income households in the $30,000 to $69,999 bracket, and the 18-34 and 35-49 age groups are feeling high financial stress.

About 51% of households in the middle income bracket said they would face increased financial difficulty if they lost their job, while only 32% of households earning above $70,000 said they would experience stress.

Meanwhile, about 48% of those aged 18-34 said they could only last one month on their savings, compared to 25% of those aged over fifty.

The survey also shows that 38% of Australians will use a credit card to pay bills in the September quarter, while 42% of middle income households will use credit cards to pay for items they couldn’t otherwise afford.

The expectations in the business community fared no better, with over 33% of respondents saying they expect to reduce staff in the coming quarter. Dun & Bradstreet said this comes as it expects the unemployment rate to reach 6.5% by the end of the year.

Christine Christian, D&B chief executive, says the survey shows that the deteriorating economy is making it hard for Australian households to manage their budgets.

“We are now seeing demographics that were previously relatively stable financially, facing difficulties managing their expenses as the rise in unemployment flows
through to households. And, with unemployment expected to continue rising, an
increasing number of Australians will be impacted in the months ahead. This could
result in a further deterioration in consumer finances forcing some Australians into
deeper financial difficulty before conditions improve.”

“In addition, the flow on affect of rising unemployment on the economy could also impact consumer spending, which has been buoyed in recent months by the
Government’s stimulus package. If retail sales drop in the coming months the local
economy will come under increased pressure and we will likely experience another
quarterly contraction in GDP.”

But Christian said there are some good results, with 37% of middle income households indicating their intention to reduce spending in the next few months, compared to 31% of higher income households. About 39% of 18-34 year olds plan to cut spending during the September quarter.

“It is positive to see consumers who are facing financial difficulty addressing their problems and working to better manage their finances. Consumers who ignore these issues run the risk of ending up with black marks on their credit file or as another statistic on the consumer bankruptcy register,” Christian said.

Christian also points to recent growth in new home loans, which experienced an eighth consecutive month of growth in May. She said further growth in property may signal recovery.

“It is clear that the road to recovery in Australia still has a way to go, however it is
pleasing to see some signs of promise,” said Christian.

“Some demographics are well-placed to take advantage of the current economic
situation and are doing so by entering the housing market while interest rates are
low.”