Financial Hardship – Many Australians Are Experiencing Financial Hardship

Information verified correct on October 27th, 2016

As one of the world’s biggest economies and one with an impressively low population density, Australia could easily be expected to exit the recent recession on steady footing. Instead, we’re faced with increasing rates of poverty, unemployment, and homelessness, and few signs of immediate change. In a March 2011 report, the Australian Council of Social Service (ACOSS) showed that some 2.2 million Australians (about 10% of the population) were living below the poverty line. Of these, 105,000 are homeless.

Living costs, wages, and debt

The rising cost of living, particularly food prices and rent, is the key culprit. ACOSS reported that living costs in Australia have been steadily rising since 2000. But people’s earnings aren’t keeping up; in fact, wage growth slowed in March despite promising growth in the previous quarter, according to the Australian Bureau of Statistics.

For upper- and middle-class Australians, the easy solution is to put everything on credit. Australia is one of the world’s biggest credit card users, with consumer debt rising to almost $50 billion this year. That’s over $3,300 of debt per Australian, or more than 82% of the average monthly salary. If things aren’t kept in check, all that debt will soon catch up to consumers.

Financial exclusion

Debt isn’t our only issue, though. A more serious problem faces those who cannot even get their hands on a credit card. These people make up one-seventh of Australia’s adult population, according to a joint study by the Centre for Social Impact, the National Australia Bank, and the University of New South Wales. Financial exclusion—the lack of access to basic services like personal loans and savings accounts—is one of Australia’s most endemic yet least actively addressed problems. The study is the first and largest of its kind ever conducted in Australia.

In an emergency, says lead researcher Chris Connolly, 2.65 million Australians would be hard put to raise $3,000 and do not have adequate insurance to cover the cost. Without access to financial aid, financially excluded people can only turn to predatory, fly-by-night lenders who will lead them into a debt spiral, and eventually into bankruptcy. Economists are already predicting a bankruptcy surge this year as a result of excessive debt, according to the Sydney Morning Herald. At the end of the day, it’s the economy as a whole that suffers.

Help at hand

More than ever, it’s important to keep debt and personal spending in control. While you can’t control the price of gas or your bank’s interest rates (although you can change banks), you can adjust your habits so that they don’t put you on the streets. Use tools like the MoneySmart budget planner to help you see what you can afford and what sacrifices you’ll have to make.

If you need to turn to credit, choose your lenders wisely and shop around for the most competitive rates. Better yet, look into government aid first. Local governments usually offer targeted assistance for specific groups, such as those in disaster-hit communities, those who are too old or sick to work, and those who cannot afford basic utilities. There are ways to beat poverty—you just have to look in the right places.

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