Job insecurity and financial caution to encourage RBA to ‘wait and see’
The latest Household Financial Comfort Report from ME Bank outlines that the Reserve Bank will have time to ‘wait and see’ on rates this afternoon, as financial caution and job insecurity colour the findings of their survey.
In the top three concerns for households is job security, up 5%, to 31% of households in the six months to December 2013.
Concerns about finding a new job within a period of two months if unemployed rose 1% to 55% of the working population.
Similarly, households are remaining cautious with their finances and are avoiding risks with investments. For instance, self-noted risk avoiders came in at 37% as compared to self-noted risk takers at 18%.
Interestingly, self-funded retirees had the highest number or risk takers to risk avoiders, 32% to 19%, compared to Gen Y, 21% to 37%, Gen X, 21% to 33%, Baby Boomers, 17% to 37% and government-funded retirees at 10% to 58%.
ME Bank’s CEO, Jamie McPhee, said that the report also identified that the number of households struggling to save on a month-by-month basis increased 2% to 51%, with 46% having less than $5,000 in emergency savings funds.
With just 26% saving for a ‘rainy day’, 11% are spending more than they earn while 5% are using equity in their homes to make ends meet.
“The rise in job insecurity, a result of increasing unemployed persons and increasing casual/part-time jobs, is exacerbated by a relatively low level of household comfort with emergency cash buffers and more generally, current savings and investments,” said McPhee.
Households with savings are showing another sign of caution, with 34% paying off their debts as fast as possible.
“Notwithstanding low interest rates and rising share prices and to a lesser extent rising house prices, the findings support the case for the RBA to continue to ‘wait and see’ on official cash rates, as it looks for increased household spending and investment as the economy as a whole passes the peak in the mining investment boom,” he said.
The index saw household financial comfort at 5.52 out of 10 in December 2013.
“In terms of households, significant rises in financial comfort among retirees (up 5% to 5.4 out of 10), especially self-funded retirees (to 7.2), as well as couples with older children (up 6% to 5.7), were offset by a sharp fall in financial comfort among single parents (down 5% to 4.7), notably single parents dependent on government payments (to 3.4)”, he said.
“While retirees and couples with older children are benefitting from rising equity and to a lesser extent housing markets, single parent households are concerned by the announcement to tighten government assistance and parenting payments from 1 January 2014.”
With these indicators, the Reserve Bank is expecting to hold today. A conclusion also expected by a number of economists.