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Aussies pessimism grows

Tags Financial Health Barometer
Category Budgeting Financial Health Barometer

Our finances are in better shape than ever, but we’re increasingly pessimistic about the future, according to RaboDirect’s latest Financial Health Barometer, (FHB). Although people are more likely to report they’re being paid more for their job, are more financially comfortable and have more money to live off compared to this time last year, they’re not at all optimistic about the nation’s health.

Generational pessimism

According to over half (54 per cent) of the respondents, Australia’s economic situation will become somewhat or much worse over the next 12 months, compared to only 37 per cent predicting gloom in 2013.

While this sentiment is generally felt equally across the board, baby boomers are the largest group of naysayers. The number of older Australians expecting the nation’s economic situation to get “much worse” has more than doubled in the last year. All in all, nearly two-thirds of boomers now anticipate the economy will worsen, compared to just 37 per cent last year.

“The federal budget is the most likely cause of this despondency”

Younger Australians, including half of Gen Y and Gen X, expect the economy to worsen, and as many as one in five Australians now expects things to get “much worse”. That’s an increase from just 10 per cent this time last year.

The federal budget is the most likely cause of this despondency. More than a third (36 per cent) of the lowest household income bracket (under $20,000 p.a.), are most concerned with how the budget will affect their finances. Comparatively, just 14 per cent of those in households earning above $100,000 are equally as worried. For those in the average household income, roughly one in five Australians are feeling the pinch (21 per cent).

Financial stress easing

Generally speaking, we’re not too stressed about personal finances. Around three-quarters of Australians are financially comfortable or have “enough to get by”, which is similar to last year. The number of Australians who reported an income drop over the past year – “much less money to live on” – also remained stable at 13 per cent.

More Australians, particularly boomers, expect to be “a little worse off” or “much worse off” over the next year

But compared to 2013, twice as many Australians report having “much more money to live on” each week.  This increase was sharpest among Gen X, but it was balanced by a dip in those reporting “somewhat more” to live on.

Gen Y in particular are starting to live the high life. Compared to older generations, they’ve seen the greatest improvement to their financial situation this year. One in three have more money to live on, and fewer report falling incomes. Baby boomers are a little more squeezed, with 44 per cent currently saying they have less money to live on, compared to 40 per cent in 2013.

Regardless of current financial comfort, national concerns are matched by personal pessimism for the next 12 months. More Australians, particularly boomers, expect to be “a little worse off” or “much worse off” over the next year. Gen Y are the most resilient, with half expecting to enjoy the same or improved finances in the next year.

Given these gloomy expectations, the smart thing for Australians to do would be to get a savings plan. There’s more money around now, but we all fear it won’t last. Those especially who have “much more money” to live on should be stashing some of it away for that impending rainy day.

Confidence drop

Saving is all the more important given that people are also increasingly pessimistic about their ability to improve their finances. One in four now feel that “nothing I do will make a big difference to my financial situation” compared to one in five last year. More than one in three (36 per cent) claim they live paycheque to paycheque and 37 per cent “scrimp and save to make ends meet”.

The proportion of those who feel confident with their finances has fallen below half (53 per cent to 49 per cent). Only 71 per cent live within their means, and 30 per cent always feel like they are in the red.

Boomers lead the way when it comes to money management. They’re more likely to say they live within their means and less likely to say they live in the red or that they scrimp and save.

At least stressed Australians aren’t hitting the bottle. Most would prefer to give up alcohol before coffee if they were under financial stress. However, non-essential appliances would go before alcohol.

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