Australian households have never felt better about their finances, but the record comfort level may be short-lived as many families worry about long-term negative effects of COVID-19 and the surging costs of living, the ME Bank Household Financial Comfort Report reveals.
Financial comfort among households rose 3 per cent to 6.04 out of 10 over the year to December, and climbed 8 per cent higher compared to its pre-pandemic level.
The heightened financial confidence largely reflected the rising residential property and investment markets, job gains driven by the economic recovery and high precautionary savings, said ME’s consulting economist, Jeff Oughton.
However, many households remained pessimistic about the future, with one in three predicting negative long-term impacts of COVID-19 on their finances.
The sustained surge in the cost of living has emerged as the biggest worry for more than two in five households – a 9 percentage point rise from a year ago.
Among families whose financial situation worsened in the past six months, 20 per cent claimed the cost of necessities as a primary reason.
“On the surface, the financial comfort of the average Australian looks better than ever, but it’s fragile – and has begun to fall for many households – especially those with low comfort,” Mr Oughton said.
“The rising cost of necessities [such as rent, food, fuel, and so on] combined with fixed or stalling income gains and the long-term impacts of COVID-19, is causing financial worry among many households.”
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