Financial comfort of Victorians hits six-year low: Report

The financial comfort of Victorian households has dropped to a six-year low as families find themselves increasingly hamstrung by the rising cost of necessities.

Households in NSW, meanwhile, posted an increase in their level of financial comfort, according to ME’s biannual Household Financial Comfort report, on the back of low unemployment and higher household wealth than other states.

The 13th in the ME series establishes financial comfort by surveying 1500 Australians, asking for a 1-10 comfort rating across 11 metrics, including ability to handle a financial emergency, and satisfaction with their level of debt, savings and investments.

Victorian respondents reported an overall grade of 5.3 out of 10 in financial comfort, which marked a 7 per cent slide – the worst in the study’s six-year history – and took the state below the national average due to “deterioration across most drivers”.

The fall also takes Victoria to the position of second-least financially comfortable state, behind South Australia which, according to the report, posted a 5 out of 10 comfort level – 9 per cent below the national average.

“Victoria’s decline can be attributed to falls across most key drivers of financial comfort, including lower confidence in handling a financial emergency (loss of income for three months) and less comfort with investments,” ME consulting economist Jeff Oughton said, adding that the divergence between NSW and Victoria in the data was significant given the states had tracked largely in unison in the past.

But the result is perplexing to CommSec senior economist Ryan Felsman, who says most recent economic measures show Victoria coasting along fairly nicely.

“If you look at the State of States [economic report], Victoria is ranked number two and it has been number two for quite a while,” Mr Felsman told Domain.

“NSW is going gangbusters at the moment but Victoria isn’t too far behind – it ranks second in five of the eight indicators … so things are going pretty well in Victoria, I would have thought.

“Victoria has very strong population growth, but also strong employment, so if you couple that with strong home building, in particular, I would have thought consumer confidence down there would be pretty much stronger than everywhere else apart from NSW.”

The nation’s main financial gripe is the rising cost of necessities such as fuel, energy and childcare, Mr Oughton said.

“Households’ comfort with paying their monthly living expenses fell 3 per cent to 6.4 out of 10 during the six months to December 2017, the lowest it’s been since mid-2014,” Mr Oughton said.

The report showed almost half of households surveyed cited the cost of necessities such as fuel, utilities and groceries as one of their biggest worries, which is a pain CommSec can confirm with some data.

“Petrol prices rose by 10 per cent in the December quarter, so that’s certainly pressuring household budgets across the country,” Mr Felsman said.