Only one quarter of Australians are considered “financially fit”, according to a new survey, but 44% of respondents say they have become more conservative in their spending habits.
The fourth annual Bankwest Financial Fitness Index is based on a survey of 1,000 individuals. It measures 14 signs including housing costs, debt, savings, insurance and financial assets.
Ratings include the following:
- Financially fit: regular savings, a range of insurance, low housing costs, high asset levels relative to debt and income.
- Borderline fitness: moderate savings, some insurance, average housing costs, moderate debt levels.
- Financially unfit: overreliance on debt, little or no regular savings, no insurance coverage, high housing costs relative to income.
According to the index, only 25% of Australians are considered financially fit. However, this compares with just 17% a year ago, and is the highest level in four years.
More than half of all of the respondents say they have changed their spending habits, with 44% becoming more conservative.
Meanwhile, just under a quarter of respondents are considered financially unfit, which is an improvement on the 31% recorded a year ago, while just over half (51%) are borderline.
But according to Bankwest, the increasing number of financially fit Australians means fewer sales for retailers as consumers continue to rein in their spending.
“Consumers are…being more careful with their finances, such as using cash or debit cards to make purchases rather than credit,” Bankwest retail chief executive Vittoria Shortt says.
“This follows on from last year when consumers were making a conscious effort to reduce their debt levels and curb their spending.”
According to the index, women have changed their spending behaviour the most, with 46% saying they have reduced their outgoing expenses, compared to 43% of men.
Women are also catching up to men with regard to financial fitness, with 19% of female respondents in a sound financial position, which is an 8% improvement on a year ago.
In contrast, more than a quarter of men are considered financially fit (27%), which is an increase of 5% year on year.
The youngest and oldest generations have seen the most dramatic improvement in their financial fitness levels.
The number of Generation Y respondents found to be financially fit has doubled from 6% to 12% over the past year, while the number of financially fit retirees jumped from 20% to 39%.
Generation X has replaced Generation Y as the most financially unfit, at 36%.
Generation Y respondents have changed their spending habits more than any other group (63% compared to an average of 52%), with more than half becoming more conservative.
“Generation Y is the least burdened with long-term debt, such as a mortgage, so they have the most legroom to change their immediate habits,” Shortt says.
The findings come on the back of the latest retail sales figures from the Australian Bureau of Statistics, which show retail sales rose 2.7% year on year in January.
The seasonally adjusted month on month improvement was 0.3%, which follows a 0.1% fall in December and a flat result in November.
According to the ABS, apparel, footwear and personal accessory retailing rose 1.3% month on month, while cafes, restaurants and takeaway food services rose 0.4%.
Food retailing was unchanged while household goods sales were down 0.2%.
Australian Retailers Association executive director Russell Zimmerman says while clothing and footwear retailers have seen some relief, “it’s still a sad state of affairs”.
“The only way to entice customers is to discount heavily and stir up a shopping frenzy. Retailers need lasting relief rather than…short-term reprieve,” Zimmerman says.