Financial stress causing $31 billion in lost productivity

author-avatar By on November 12, 2020
Financial stress causing $31 billion in lost productivity

Photo by Luis Villasmil on Unsplash

AMP's 'Financial Wellness' research found 1.8 million Australians are experiencing financial stress, causing employee distraction and absenteeism.

The findings are based on a survey of more than 2,100 Australians, conducted between June and July, and extrapolated using wider Australian Bureau of Statistics (ABS) data.

The survey also found about half of the workforce experienced at least some level of stress about their finances, with those 'severely' or 'moderately' stressed 'ineffective' at work for 7.7 hours per week.

Sick days among the financially stressed also mounted, averaging out to an additional 1.2 hours every work week.

One in five females reported financial stress, as opposed to just over one in ten males.

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers.

Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.

The stress might also peak over the coming months - Standard and Poor's (S&P) said in a report that any present mortgage hardship data does not "reflect genuine debt-serviceability pressures".

"We expect these trends to surface later this year and, more meaningfully, in the first quarter of 2021," the report said.

This coincides with the second wave of mortgage deferrals expiring, after many lenders offered deferrals until March 2021, and is despite renewed positive sentiment in the housing market, with Australians' average debt twice that of their income - led largely by housing - according to the ABS.

Australia's household debt-to-GDP ratio is also about 120%, second in the world only to Switzerland.

AMP's director of workplace super Ilaine Anderson said the stress goes beyond COVID-19 impacts.

"The research – conducted since 2014 – shows that financial stress remains a systemic issue in Australian society," she said.

“This is spilling into work with stressed employees worried and distracted, and not performing at the levels they’re capable of, or they don’t turn up at all. The combined effect is costing Australian businesses billions each year."

AMP's research also comes after CommBank teamed up with the University of NSW's 'Gendered Violence Research Network' to determine key areas for financial institutions to provide support to those undergoing economic and financial abuse.

"Financial abuse is a hidden epidemic affecting thousands of Australians who are experiencing domestic and family violence," CommBank group executive Sian Lewis said.

"Yet, there is limited academic evidence on the issue making it difficult to develop and deliver effective support for people impacted."

Such support measures identified include tailored financial products for victims, increased training for domestic violence support teams, and identifying how financial products can be misused by abusers and perpetrators.

If you or someone you know is experiencing domestic or family violence, call 1800RESPECT (1800 737 732) or visit www.1800RESPECT.org.au.

For counselling, advice and support call Men’s Referral Service on 1300 766 491 or ntv.org.au/get-help.

In an emergency or if you’re not feeling safe, always call 000.

Non-banks lenders still outperforming major and regional banks

S&P data shows non-bank lenders' COVID arrangements amounted to just 3.5% of the prime loan book in September.

This is ahead of the majors at 5.2% and regionals at 7.2%.

Other banks' arrangements also amounted to 5.5% of the loan books.

A tick over 4% of all low-doc home loans were in arrears by 90 days or more.

These figures are down sharply on May and June's results, however.

For example, 10.9% of regional banks' prime loans were deferred in June.

This data is "reflecting the gradual reopening of the economy in most parts of the country," according to Westpac's credit strategy team.


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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Harrison joined Savings in 2020. He is an experienced journalist, with previous stints at News Corp and financial comparison site Canstar. With a keen interest in personal finance, Harrison is passionate about helping consumers make more informed financial decisions.

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