Australians doing it tough financially, psychologically during inflation crisis

Fewer Australians are earning enough to meet their needs than before the pandemic, leaving people in psychological distress and dissatisfied with the direction of the country, according to new research from The Australian National University (ANU).

The latest ANUpoll, from a sample of over 4,200 Australians, found that 30.3 per cent of Australians are finding it “difficult” or “very difficult” to live on their current income.

With 16 waves of data since prior to the pandemic, the ANUpoll series of surveys provides the most comprehensive story of how financial wellbeing has tracked from before, during and in the immediate aftermath of the pandemic.

The key finding from the latest release is that more Australians are finding it difficult to get by on their current income compared to the low point of the pandemic (17.3 per cent in November 2020), but also a significantly higher proportion than the pre-pandemic baseline (26.7 per cent in February 2020).

“These findings paint a challenging picture of the Australian economy, which has been battered by the pandemic and an inflation crisis in recent years,” author and Associate Director of the ANU Centre for Social Research and Methods, Professor Nicholas Biddle, said.

“While on some measure Australia has performed better than some of its counterparts during these challenging times, our results show that many people on the ground are doing it really tough.”

The results confirm that some Australians have been more severely impacted by the inflation crisis than others.

“There has been a widening gap in financial stress in the inflationary compared to pandemic periods,” co-author Professor Matthew Gray said.

“Females, Aboriginal and Torres Strait Islander Australians, those with low education, and those in disadvantaged areas all pulled further away than the rest of the population in 2022/2023 compared to 2020/2021.”

In the wake of the release of Treasury’s Intergenerational report, the paper also shows some big differences by age cohorts. The rate of financial stress was highest amongst 35 to 54-year-olds, with under 35s reporting the second highest rate. The lowest rate of financial stress is amongst over 75s. These gaps have also widened during the inflationary crisis.

“This shows that there are particular age groups who have borne the brunt of price rises and stagnant incomes,” Professor Biddle said.

The housing market adds complexity to the financial wellbeing story. Financial stress is highest for renters, with 15.7 per cent finding it very difficult to live on their current income, compared with 8.9 per cent of mortgage holders, and 4.9 per cent of those who own their own home without a mortgage. However, mortgage holders appear to have been hit worst by the inflation crisis, with a narrowing of the gap between mortgage holders and renters, but a widening gap with those who own their own home outright.

According to the study, the glum economic mood is having an impact on people’s wellbeing and financial decision-making.

In the 12 months preceding the survey, more Australians had postponed major purchases, fallen behind on bills, spent less on groceries and essential items and provided other indicators that they've been mindful of their household financial situation.

There’s also been a slight increase in people accessing their superannuation early – 7.2 per cent, up from 5.9 per cent in January 2023 – despite government policy remaining relatively constant in that time.

The researchers found that women were more likely than men to have taken these sorts of financial actions – as they were in 2021 – but also that the gender gap has widened in that time.

People aged 25-34 years were the most likely of any age group to have taken steps to cut back, followed by 35-44-year-olds. Australians aged 65-74 and over 75 were the least likely to have taken these steps.

This difficult economic climate may be having a serious impact on the wellbeing of Australians.

In the April 2023 poll, people reported a large increase in psychological distress – reaching levels not observed since the outbreak of the Delta variant of Covid-19, when much of the country was under lockdown. Distress did not decline between April and August 2023 polls and remains significantly above Australia’s pre-Covid baseline.

Satisfaction with the way the country is heading declined in the August poll, with under two-thirds of Australians thinking things are moving in the right direction.

“Satisfaction with the direction of the country is approaching the levels we saw just before the federal election, which will be a worry for the prime minister and his first-term government,” Professor Biddle said.

The findings from the latest ANUpoll are available online. 

This media release was originally published by ANU media here.