Australians are being more economical due to COVID-19, with many concerned that life will not return to normal by the end of the year, new research from the Melbourne Institute has indicated.
The latest Taking the Pulse of the Nation survey, conducted July 6-10, showed that 45 per cent of Australians are spending less than they were before the pandemic at the beginning of 2020. A third said their spending level hasn’t changed, and one in five are spending more than they were pre-COVID-19.
Many Australians also expect their future spending will be reduced. One third reckon they’ll be cutting their spending at the end of the year, and of those who are already spending less, more than half think they’ll still do so when the year ends. Researchers note that this is a sign that there’s concern around whether life will go back to normal this year.
Close to 40 per cent of poll respondents believe they’ll spend around the same as pre-pandemic days.
Australians appear to be financially coping slightly better with COVID-19, with 22 per cent saying they are finding it difficult to pay for essential goods and services, a fall from 25 per cent since the previous week.
The proportion of those in financial stress decreased in all states bar Victoria, where financial stress was up by 2 percentage points. The state, which has become the new COVID-19 epicentre in Australia, has experienced a resurgance in confirmed coronavirus cases. Parts of the state are in the middle of a six-week stage three lockdown.
The research also found that while consumption is likely to improve towards the end of the year, it’s widely expected that spending levels may still be lower than pre-pandemic days.
“This is serious as household consumption expenditure is already low,” Melbourne Institute Professor Guay Lim said.
“Household consumption expenditure has already fallen in all states, from a positive quarterly growth in December 2019 to negative values in March 2020. Further declines in spending will seriously hamper the economic recovery process.”
Meanwhile, older Australians are generally spending less now, but expect to spend more post-pandemic. And while those that were most financially stressed trimmed their budgets the least, researchers believe this suggests they have less room to reduce spending.
What to do to better manage your household expenses
There’s no doubt that COVID-19 has changed how Australians spend their hard-earned money. Melbourne Institute researchers pointed out that Aussies are reducing their spending in areas such as hospitality, tourism, transportation, recreation and entertainment.
But they’ve also ramped up consumption in other areas, including groceries, food delivery, bills, cleaning appliances, and furniture and office equipment.
If you’re concerned about your ability to pay for household expenses going forward, one of the first things you might want to do is start a spending budget. To save money effectively, you need to know where your cash is going. Through a detailed budget, you’ll be able to identify where your larger expenses go, detect areas where you can cut back and plan for future expenses. More than half of households said they wished they had saved more before COVID-19 to help them with their finances during the economic downturn, a recent St George Bank survey showed.
It might also help to target any larger debts you may have. For many people, this is likely to be their home loan. With such low mortgage rates, it could be possible for you to ask for a lower rate or refinance to another lender that is able to offer a better deal. A lower rate may potentially mean lower monthly repayments, though you may want to speak to a licensed financial adviser or mortgage broker to see how it might impact your mortgage.
- To see a list of lenders providing breathing room to coronavirus-affected Aussies, check out RateCity’s COVID-19 relief hub.