Financial wellbeing hits record high despite pandemic

Despite a once-in-a-lifetime health pandemic and against all expectations, the financial wellbeing of Australians has hit an all-time high.

According to Commonwealth Bank’s latest Australian Consumer Financial Wellbeing report – which harnesses the data of over 5 million customers – over the 12 months to March 2021, Australians’ financial wellbeing soared 7.8 per cent to a new record score of 51.1 (on a scale of 0 to 100).

This marks the highest level and largest year-on-year increase ever recorded since the Financial Wellbeing score was first calculated in 2017.

CBA’s Australian Consumer Financial Wellbeing report is based on the Melbourne Institute’s Observed Financial Wellbeing Scale, and comprises five major components that measure financial wellbeing, capturing the extent to which Australians have financial freedom, control, and security, and can meet their ongoing obligations – now and into the future.

The report also revealed there had been a significant improvement in the financial outcomes of Australians over the past 12 months, with 17 per cent fewer customers consistently spending at ‘high levels’, and 16 per cent fewer customers ‘frequently living pay-check to pay-check’.

Speaking about the findings, CBA Executive Manager Financial Wellbeing, Ben Grauer, said it was remarkable to see a wide-ranging improvement in financial wellbeing, especially during a once-in-a-lifetime pandemic.

“Helping improve our customers’ financial wellbeing is what we are all about. While clearly there are people struggling or worse off from the pandemic, more Australians feel better off, more financially secure and more in control of their finances. Spending less, saving more and paying down debt have been the big stories from this past year.”

“Our research shows customers’ financial wellbeing is more closely linked to their financial behaviours, rather than how financially knowledgeable they are or how much they earn.”

Speaking about the data, Professor John de New from the Melbourne Institute: Applied Economic & Social Research at the University of Melbourne, said: “This unexpected improvement in financial wellbeing could be explained by a number of factors including: the targeted and swift Australian government fiscal policy intervention (including the introduction of JobKeeper and JobSeeker); expansionary monetary policy through historically low interest rates; widespread loan deferrals; emergency access to superannuation; and changes to consumer spending patterns amid lockdowns and economic uncertainty.

“These factors combined have been beneficial to Australians’ financial wellbeing, as they have allowed people to reduce their expenses and spending, and save more – thereby providing them with greater economic security at a time of widespread international insecurity and instability.”

According to the report, Australians’ median annual savings balance increased by $1,115 – further reinforcing the idea that consumers have reduced their spending and adopted a more cautious approach to their finances during these uncertain times.

“With total employment and other macro-economic indicators almost back to their pre-pandemic levels, this increase in savings buffer, prudent behaviour and associated improvement in financial wellbeing will serve Australians well to deal with future challenges as the economy continues its recovery,” Professor de New said.

Mr Grauer said greater savings balances meant fewer Australians were now struggling financially, with the Scale recording a 5.5 percentage point drop in the proportion of Australians considered to be ‘just coping’ or ‘having trouble’.

“Pleasingly, we also recorded improvements across the top two categories in the financial wellbeing scale, including a 6.5 per cent increase in those Australians considered to be ‘getting by’; and a 28.3 per cent increase in those who were ‘doing great’,” he said.

About the Australian Consumer Financial Wellbeing Report

The Australian Consumer Financial Wellbeing Report is a new quarterly report from CommBank and the Melbourne Institute: Applied Economic & Social Research at the University of Melbourne. The report provides a nationally representative view of Australians’ financial wellbeing, and describes the annual rate of change to financial wellbeing outcomes for more than a quarter of the Australian adult population. The report’s methodology draws on the MI Observed Financial Wellbeing Scale, a world-first, objective measure of financial wellbeing based on banking records.

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