Australians not about to change their approach to borrowing and investment
Posted August 29th, 2009
According to research by Finsia (Financial Services Institute of Australasia) Australians are not prepared to change their approach to borrowing and investment despite the global financial crisis.
The research by Finsia in partnership with UMR Research examined the overall impact of the global financial crisis on our generational wealth divide. It helped the companies to gain deep insights into a wide range of topics such as household savings and debt levels, consumer investment strategies and retirement planning of Aussies.
60 per cent of Australians are in some financial hardship:
Even so most Australians have remained relatively positive about the state of our economy, some 60 per cent have been affected by it and are now battling financial stress in various levels.
The hardest affected are the elderly. According to the research some 36 per cent state the GFC has affected them slightly in a negative way of which most are pensioners, and elderly people.
Self-funded retirees are in the worst affected group of 16 per cent. Of those 20 per cent who have investments many have sold non-superannuation assets to use as immediate cash flow.
No lasting effects for long-term:
Of the people surveyed (51 per cent) and affected by the GFC most believe the negative effects won’t last. Many believe that within the next five years things will settle back to normal.
Investment and borrowing on hold thanks to the Yanks:
US, or Yank banks are mainly blamed for the state of our economy by most people. However, we also lay the blame to closer shores, namely ourselves because of our greed as a consumer society.
It is also interesting to note that we as a nation have developed this voracious appetite for credit cards with 79 per cent of the nation holding a credit card. Out of the lot, just over one quarter (27 per cent) do pay interest on their card debt. The worst affected in that group are generation X born consumers. A big worry is the fact that 18 per cent of those don’t even realise they are paying through the nose with their interest charges (women and elderly mainly.
Access is too easy:
One of our biggest concern (84 per cent) is that access to cards is given too freely to those who are unable to pay back their debt in the first place. Out of all consumers (79 per cent,) 85 per cent believe credit card regulation needs to be a lot more strict.
Lack of financial literacy among Australians:
The research also indicated that many Australians were lacking financial understanding to make informed choices. Most Australians believe their superannuation savings to be inadequate when they retire. A mere 5 per cent believe otherwise.
Sadly enough, most Australians don’t know or understand how their superannuation funds are invested nor are they interested to find out.
How do we fare in our understanding of super:
- Australians aged 40-49 years (14 per cent) closely monitor how much superannuation they have.
- Six per cent of Australians aged 30-39 years and
- a mere three per cent of those in the 18-29 year age group monitor their superannuation.
Dr Martin Fahy, Chief Executive Officer of Finsia, said: “While Australia has fared considerably better than other developed economies, the GFC has exposed a number of very real concerns with regard to household debt broadly and in particular, savings levels, mortgage and credit card stress, and retirement savings strategies in Australia.”
“Despite recognising the inadequacy of their retirement savings and the unsustainable levels of access to easy credit, Australians appear largely unwilling to change their borrowing and spending approach in order to address their longer term financial security. The collective ‘she’ll be right’ view seems to trump any concerns about the reality of burgeoning debt levels and the erosion of wealth as a result of the GFC.”
Other tidbits about the Finsia study:
- Generation X is the least confident their superannuation will be sufficient to live on upon retirement (76 per cent).
- Since the start of the GFC, 19 per cent of Australians have increased their mortgage payments. Most of them fall into the 30-49 and 70+ age groups. The GFC has also prompted 16 per cent overall to decrease their payments.
- 38 per cent of Australian’s are saving more than 10 per cent of their income. Some 41 per cent save between one per cent and 10 per cent and 18 per cent usually don’t save anything.
- Before the start of the GFC, across all age groups between 18 and 69 years, the age bracket in which the highest percentage of working Australians say they expected to retire was 61-65 years. However, after the start of the GFC across all age groups between 18 and 69 years, the age bracket in which the highest percentage of working Australians say they expect to retire had risen to 66-70 years.
Fahy concluded: “As some observers suggest that the worst of the GFC is now behind us, the danger is that we risk forgetting the lessons learned from this economic downturn. The ensuing months provide an opportunity to review our household debt levels and to develop policy responses which encourage an appropriate balance of savings, debt and consumption.”
Investment and borrowing might be approached differently at this moment in time with credit cards being the major catalyst to borrowing strategies, but even so, investment has never been more attractive with the current low level of our interest rates across the board.
Source: NineMSN
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Comparison of our Top Credit Card Offers
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Westpac 55 Day Credit Card | No annul fee for the first year with a low rate on balance transfers and purchases | 0% for 5 months (reverts to 19.59% ) | 3.99% for 6 months | $0 | 21.49% | |
ANZ Frequent Flyer | An exclusive bonus points offer, Plus extended warranty, overseas travel and medical insurance,90 day purchase security insurance. | 19.74% | $95 | 20.99% | |
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