Rich stressed as bonuses culled

The number of stressed households fell by 3% in the last month to 770,000, says a survey from business service provider Fujitsu Australia and New Zealand.

The number of stressed households fell by 3% in the last month to 770,000, says a survey from business service provider Fujitsu Australia and New Zealand. However affluent stress (those who live in the northern beaches of Sydney) went up 7% due to lower or no bonuses and margin calls.

And small businesses are doing it particularly hard, with households reliant on incomes from the SME sector concerned about their future earning prospects. As a result they are pulling back on their discretionary spending, says the latest edition of the Mortgage Stress Survey released today.

The survey based on a rolling 26,000-consumer survey updated monthly found that many households were now concerned about falling investment returns and the spectre of rising unemployment.

The survey also found that those in severe stress rose by 13% to 291,000. Severe stressed households are more likely to be forced to refinance or sell in the coming months.

With unemployment now forecast by the Treasury to rise to 5% by June 2009, Fujitsu Consulting estimates that total stress will rise to over 1.1 million households by the same time frame, with 433,000 households likely to be in severe stress.

This has the potential to translate to 27,000 defaults in a full year. If unemployment were to rise to 9% by the end of 2009, as some economists are suggesting, then defaults could be expected to rise to over 100,000 in a full year. This is after offsetting additional interest rate reductions and adjusting for lower levels of inflation through 2009, the survey says.

The report also found that 35% of workers employed by small businesses reported that overtime was significantly down, and 21% said they knew of colleagues who had lost their jobs in the last few weeks.

“One reason why severe stress is up is the SME sector, traditionally the engine of the economy, is under some stress just now,” says Martin North, managing consulting director, Fujitsu Consulting.

North says affluent stress continues to increase as more margin calls and falling sharemarket returns continue to have an impact.

He says the survey also found a significant number of “off the plan” speculative property investors now faced the prospect of trying to sell in a falling market and are facing potential negative equity as a result.

In addition, despite recent increases in first time buyer incentives, concerns about future employment have frozen out many potential first time buyers. “Affluent stress continues to increase as more margin calls and falling sharemarket returns continue to have an impact.”

The survey results also revealed property prices in many suburbs will continue to drift down until uncertainties about employment abate. Fujitsu Consulting’s review suggests this is not likely to eventuate for the next 12 to 18 months. “It is unlikely that future interest rate cuts, even if they are fully passed on to households, will turn this around.”

Fujitsu Consulting has been tracking the mortgage industry for more than five years with its “stress-o-meter” reporting monthly results for the past two years.

“Until we see unemployment trends falling, the housing market will continue to experience significant difficulty, and many households will continue to struggle to keep their heads above water, despite falling interest rates,” says North.