The Centre for Social Impact (CSI) has today released a new policy response to COVID-19’s impact on the Australian community’s financial wellbeing. It takes a closer look at the effectiveness of government responses.
The Financial Wellbeing and COVID-19 paper highlights that while there are some areas for improvement, the response from government to-date has protected many of the most vulnerable Australians.
Lead researcher Dr Jeremiah Brown from the Centre for Social Impact at UNSW Sydney said that while the lockdown practices have reshaped the functioning of Australian society, the long-term results of these changes are complex, and still unfolding.
“From a financial wellbeing perspective, the most significant change we have already observed is that many households have seen their income reduced,” Dr Brown said.
“The impact varies by household, but the Australian Bureau of Statistics estimates that 2.3 million people were affected by job loss or had their hours adjusted for economic reasons between April and May.”
A recent Consumer Policy Research Centre report estimates that 12 million Australians are concerned about their financial wellbeing as a result of COVID-19.
“Prior to the pandemic, there were a number of indications that Australians were not well placed to cope with a large economic shock. That’s why so many households have been heavily affected by the pandemic in complex ways,” Dr Brown said.
“If you look at the research, prior to the pandemic, one third of the Australian private rental market was in housing stress, Australia had the second highest household debt to income ratio in the world, approximately 30% of Australian households have less than one month of income worth of savings and one in eight Australians would not be able to raise $2,000 within one week in an emergency.
For many households, a slight drop in income will hit hard as they don’t have savings to draw on when their income decreases.”
What are the other major points in the paper?
- Unemployment rate increased from 5.2% to 7.1% from March to May – excluding workers stood down but are receiving the JobKeeper payment. If those people are included, then the number increases to 9.5% in April and 8.2% in May.
- Monthly hours worked in all jobs was down 9.5% from March to April, and 0.7% between April to May. In the recessions of the 1980s and 1990s, hours worked fell by only 6% in 18 months.
- The rate of employed people working less than their regular hours, or no hours at all has increased significantly, with that number at around 1.8 million people in April, and reducing slightly to 1.55 million in May.
- There are expectations that mortgage stress levels will exceed those seen in the Global Financial Crisis. We have already seen mortgage stress become a significant factor, with an estimated 1.4 million Australians in mortgage stress.
- However, the additional money provided by the Coronavirus supplement has increased the payment rate and lifted the social security payment rate above the poverty line. The number of people reporting skipping meals because of a lack of funds is declining by over half to 33%.
- Casual workers, universities, people on visas, people protected by eviction freeze and people with disability are some of the key groups who are financially vulnerable as a result of COVID-19.
The CSI Financial Wellbeing and COVID-19 fact sheet is available here.