Why life’s a stressful house of cards for Australians unable to cope with financial stress

Kevin Spacey in House of Cards ... it’s unlikely Spacey needs to rely on credit to make it to the end of the month. Supplied Source: Supplied

EXCLUSIVE

Two-thirds of households are cutting back to cope with growing financial pressure.

Research by the nation’s leading consumer group, Choice, reveals the top ways people are coping with the crunch are by spending less on entertainment and clothing.

Families with school-aged children are most worried about the rising cost of living.

One in five people say they have been living off their credit card to cover the gap until next payday. This is most common among those with a home loan.

“We are concerned to see these signs of household stress at a time when inflation and

mortgage interest rates are historically low,” said Choice CEO Alan Kirkland.

Read the full report on the Choice website

How the young are getting ahead faster than the rest

Most households are having to cut back to make ends meet. Picture: ThinkStock Source: ThinkStock

Inflation — which is the rate of price increases — has been relatively tame since 2009. And most home-loan customers are paying less than 5 per cent interest on their borrowings, well below the long-run average of more than 7 per cent.

Eighty-five per cent of those Choice surveyed said household bills have increased over the past year. There is growing concern about every significant expense, which has not been the case in any of the five previous Consumer Pulse reports it has done.

The cost of keeping the lights on is the no. 1 worry, as it has been in each of the quarterly surveys. Filling up the car has risen to equal-second, alongside filling up the shopping trolley.

A rally in the oil price has caused the most rapid rise in the fuel costs in 25 years, according to CommSec economist Craig James, and was the single-largest driver of inflation in the economy in the three months to the end of June. Food and grocery costs fell slightly during that time, at least as measured by the Australian Bureau of Statistics’ Consumer Price Index.

Anxiety about costs may be being heightened by what’s happening on the other side of the equation: incomes. The ABS Wage Growth Index is rising at its slowest pace since records began in 1998.

Mr Kirkland said consumers are currently “particularly sensitive” to policy changes that affect the cost of health, education and childcare.

Choice chief executive Alan Kirkland Source: Supplied

It’s not just the Choice research that shows this — NAB’s latest Consumer Anxiety Index, published earlier this month, found the cost of living remains households’ top concern, followed by “government policy”. These have been the leading worries since prior to the last federal election.

“Addressing these concerns is important to our broader economic health, because when consumers feel scared about the future, they will refrain from the expenditure on goods

and services that drives economic activity and employment,” Mr Kirkland said.

Follow John Rolfe on Twitter: @costofliving

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