Regional Aussies battling as financial comfort hits eight-year low
Drought and bushfire has been blamed for declining financial comfort across regional Australia, now at an eight year low.
However, ME Bank's latest Household Financial Comfort Report shows financial comfort in metropolitan households lifted 3% in the back half of 2019, to 5.76 out of 10. Regional households saw a 4% fall in the same period, 5.08 out of 10, their lowest level in the past eight years.
The gap between regional and metropolitan households has now ballooned to a record 13%, just shy of twice the historical average of 7%.
"The sharp fall in financial comfort in regional areas is likely a result of ongoing drought and recent bushfire catastrophes, which have significantly lowered already low levels of financial comfort," says ME's consulting economist Jeff Oughton.
Comfort with cash savings in regional areas fell 9% and the "ability to deal with financial emergencies" fell 7%. Retirement is also weighing on the mind of regional Aussies, with "anticipated standard of living in retirement" down 7%.
On a more positive note, comfort with debt increased 7% on the back of rising home values and record low interest rates.
"Significantly lower home loan rates and relatively low and stable unemployment rates helped to significantly improve "comfort with debt" - especially in major capital cities, while a partial reversal of the fall in residential property prices in eastern capital cities and expectations of further price gains have also eased gearing concerns," says Oughton.
That's not to say mortgage stress isn't an ongoing stress, however. The proportion of households contributing over 30% of their disposable household income towards their home loan dropped a further two points to 41% of households.
The Reserve Bank's interest rate cuts have been warmly received. More households reported being better off (27%) compared to worse off (23%). The remaining households don't think it makes a difference one way or the other.
- Households in capital cities.
- Households paying off a home mortgage.
- Households with higher annual incomes.
- Households in regional areas.
- Casual workers.
- Single parents.