Financial stress on the rise as more households spend more than they earn

christianreview | 입력 : 2015/05/01 [08:19]
Financial stress is increasing in New South Wales and the number of households which are spending more than they earn has escalated during the past five years, according to a new Wesley Mission report launched in Sydney yesterday.
 
The Wesley Report Facing financial stress reveals that an alarming 44 per cent of NSW households are suffering financial stress – up from 37 per cent in 2010.
 
The survey also found that 38 per cent of NSW households are spending more than they earn - a seven per cent increase from 2010.
 
Wesley Mission commissioned Urbis to survey 500 NSW households in late 2014 and to compare the results with those found in 2010.
 
“It is a telling reality that translated state-wide almost four in ten or 1,022,010 households are now technically insolvent,” said the CEO of Wesley Mission the Rev Dr Keith Garner who launched the Report with the Deputy Chair of ASIC Mr Peter Kell.
 
Between 2010 and 2015 disposable income has decreased and an increasing number of households are spending more than they earn.
 
“When there are no savings to fall back on when an illness or misadventure hits, hardship usually follows,” Dr Garner said.
 
The ability to manage spending has also declined over time with fewer households able to keep a budget, growing from five to 19 per cent since 2010.
 
“We hear politicians of all persuasions drawing the analogy between government spending and household spending – the need to balance the household budget,” Dr Garner said. “It is clear from these figures that households are not balancing their budgets and that the burden of debt is increasingly shifting from the public to the private sphere.
 
“Households are simply not living within their means and are unable to save money.”
 
According to the Wesley Report the increase in financial stress during the past five years is not surprising given that there have been large price increases in household-related expenses. According to the Consumer Price Index (CPI), between 2008 and 2013 consumer electricity prices rose by 83 per cent, followed by water and gas prices with an increase of 63 per cent and 57 per cent respectively.
 
In addition, between 2006 and 2011, Australian consumers were spending at least 30 per cent more on health insurance, medical and health expenses, utilities, mortgage repayments and education.
 
The evidence from this Wesley Report suggests that it is not one specific aspect of financial stress that is driving the total increase in 2014; rather it is a more subtle general increase across all aspects that is having an impact.
 
As in 2010, in 2014 the most common selected indicators of financial stress were:
 
·         16 per cent of all households had to seek help from family and friends in 2014
·         16 per cent of all households were not able to pay electricity/gas/telephone bills on time
·         12 per cent  were not able not to pay for car service/repairs
·         12 per cent or one in eight households were not able to pay for medical care; and
·         12 per cent had to pawn or sell something
 
Financially stressed households were more likely to have characteristics like:
 
·         an income of $52,000 per year or less
·         the main source of income being government benefits
·         a decline in annual income over the past 12 months
·         spending more than they earn
·         a rolling credit card debt and an inability to pay this off on a yearly basis.
 
“Financial hardship and financial anxiety is impacting upon the health, safety and wellbeing of individuals and their families,” Dr Garner said. “This places a much bigger strain on medical and community services and demands a much bigger investment in addressing the management of financial stress through more counselling and education.
 
“We are also aware that financial difficulty generates a range of other issues. People who are struggling with financial stress often have other hardships such as anxiety, homelessness, addiction, or domestic violence. These difficulties can push some people beyond the point where they feel they can cope.”
 
In this latest Wesley Report more than one in five respondents indicated that financial stress had resulted in physical illness, relationship issues and mental health issues.
 
The findings from the study also reinforce the link between substance abuse and financial stress, with 15 per cent of respondents indicating that they have drunk alcohol excessively as a result of financial stress, five per cent taking non-prescribed prescription drugs and three per cent taking illegal drugs.
 
While 63 per cent of non-financially stressed households believe they can meet future expenses, only 12 per cent of financially stressed households believe they can. Nearly half of financially stressed households (49 per cent) indicated that it would simply be impossible to meet a $2,000 payment; this compares to only six per cent of those in households not classified as being financially stressed.
 
Wesley Mission believes that there is a need for a review of the requirements for financial advice, and for the creation of a simple level of personal financial advice to be available without the in-depth assessments and costs that are prohibitive to people in financial stress who are seeking advice. We need to free up the system for the most vulnerable.
 
The promotion and awareness of advice and education opportunities needs to be increased across the sector so that in the midst of tension, anxiety and uncertainty, people experiencing financial stress can find an appropriate, practical and relevant pathway to advice and planning.
                                                                                                                       
Wesley Mission promotes greater industry awareness of the issue of financial stress in both the community service provision and financial industry sectors. A broader provision of financial literacy and counselling programs across these sectors would also increase the awareness and availability of education and lower cost options to advice for those in financial stress.
 
It is important to have a broader approach to identifying and directing those experiencing financial stress to advice and education so that they can improve their financial literacy.
 
Not only should this broader approach be promoted in services engaging those experiencing financial stress, financial lenders and services should also provide information as to where individuals can find relevant financial counselling.
 
“Lenders need to seriously consider the efficacy of this approach: the introduction of simple independent financial education programs promoted through lenders would provide borrowers with a basic understanding of their capability to service different avenues of credit,” Dr Garner said. “This would also benefit the lender as it would lower the risk of borrowers defaulting.”
 
Wesley Mission is also calling for greater awareness of the experience of women in financial stress, especially among the services and financial counsellors that they engage with, to ensure that their needs are not going unseen and that their vulnerabilities are not made worse.
 
“For decades we have had health and fitness campaigns and it is now time for us to recognise that financial health is also important for physical and mental wellbeing,” Dr Garner said
 
“The evidence in this Wesley Report only underlines the fact that such concerted action is needed more than ever. The costs to individuals, the community and governments are far too great.”
 
Ends/
 
Photo: Launching the latest Wesley Mission report on financial stress: CEO of Wesley Mission the Rev Dr Keith Garner and Deputy Chair of ASIC Mr Peter Kell
 
Wesley Mission provides financial counselling to more than 1000 people each year across Sydney, Newcastle and Wollongong.
 
Urbis was commissioned by Wesley Mission to conduct the survey of 500 NSW households in late 2014. 
 
 
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