Australian households experience largest wealth decrease in nine years – how to check your own finances

Do you feel like you’re in a tighter financial spot than you were at the start of this year? You’re not alone. New figures from the Australian Bureau of Statistics (ABS) show that in the March quarter 2020, Australia experienced its largest decrease in average household wealth since the September quarter 2011. With this in mind, it could be good to conduct your own financial health check before the end of the financial year.

According to the ABS, average household wealth decreased 2.3 per cent in the March quarter 2020, falling by $9982 to $428,585 per person. This was found to be due in part to both a fall of 8.2 per cent in superannuation balances and a fall of 5.3 per cent in directly held equity holdings (such as shares), reflecting the early response to economic uncertainty brought on by the COVID-19 pandemic from later February 2020 onward.

This fall reversed the household wealth increase previously recorded in the December 2019 quarter, and was the first instance of negative growth in household wealth since the December 2018 quarter.

However, no significant negative impact was recorded for residential assets, as restrictions on auctions and open house inspections weren’t introduced until the last week of the quarter. While some owner-occupiers borrowed money in new housing loans, existing borrowers also made extra payments ahead of schedule, to take advantage of low interest rates.

Australians were found to have borrowed less money on short-term loans such as credit cards during this time, due to spending less on travel, accommodation, restaurants and recreation. Australian households were found to have deposited 1.3% more with Authorised Deposit-taking Institutions (ADIs) this quarter, due to spending less on non-essentials and preferring safer, liquid assets during uncertain times. 

While these ABS figures show the initial impact of economic relief measures from the government, the RBA and Australia’s banking industry, most of these were introduced in late March 2020. A more complete picture of their effectiveness is expected when data for the June quarter becomes available.

How to conduct your own financial health check

While the ABS can provide a “big picture” look at the overall state of the Aussie economy, to work out exactly how your own finances are doing, you’ll need to answer a few questions, such as:

Home loans

• If you have a mortgage, are you still comfortably managing the repayments, or did you hit pause on your payments?
• Has your lender cut your interest rate since the start of the year?
• Could you find a cheaper deal by refinancing?
• If you don’t have a home loan, could you be in a position to apply for one, and benefit from some of the lowest interest rates on record?

Personal loans and car loans

• Are you currently paying off a personal loan or car loan?
• If so, have you put your repayments on hold?
• Can you afford to make extra repayments and clear your debt sooner? 

Credit cards

• Have you found yourself putting more of your everyday spending on your credit card since the start of the year?
• Are you clearing your balance each month, or are you being charged interest on your card?
• Could a balance transfer credit card help you clear your outstanding balance?

Savings accounts and term deposits

• Do you have savings locked away for emergencies?
• How easy is it to access your money when you need it?
• Are you earning interest on your wealth or simply “parking” your money?

Superannuation

• Did you withdraw part of your super early?
• Are you planning to make any extra super contributions in the future?
• How expensive are the fees and charges on your fund?

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