This Week In Finance: 30 September 2022
It’s the last day of the month and inflation continues to be the talk of the town. With the Consumer Price Index (CPI) rising 6.8% in the 12 months to August, people are feeling the pinch, especially in their homes and their health.
But there seems to be a glimmer of hope, as researchers say Australia could escape the potential looming recession.
The cost of living also proves to be affecting the financial priorities of Australians, as research from the University of Sydney shows what bills are getting the boot over others.
In lighter news, the Regional First Home Buyers Grant has been moved forward 3 months, in the hopes of bringing new homes to those looking to buy in regional areas.
And finally, a list of Australia’s favourite banking apps has been released, revealing some surprising information.
Read more on all these stories below.
Cost of living proving costly
As the cost of living steadily rises, more and more Australians are feeling the financial burden.
The first monthly Consumer Price Index (CPI) data has been released, with the figures showing prices have risen 6.8% in the 12 months to August 2022.
There were sizeable yearly increases in the cost of fruit & vegetables (+18.6%), new dwellings for homeowners (+20.7%) and fuel (+15%).
These large increases in the cost of living are beginning to show their true colours in the form of many young Australians opting to move back in with their parents.
According to new research by Finder, 13% of Australians have had an adult child move back in with them in the past year, with one in three doing so because of affordability reasons.
The cost of living has also got its claws into health insurance, as more Finder research shows many Australians are reducing their health insurance or ditching it completely.
In the past six months, 6% of the surveyed Australians had cancelled their hospital cover and 7% had reduced their level of cover. With 13% of Aussies doing the same for extras, the numbers are equivalent to 2.6 million people reducing or cancelling their health insurance.
Hope for Australia to escape recession
The escalating cost of living makes it seem extremely likely a recession will happen. Despite this looming economic decline around the world, some experts are suggesting Australia has the chance to escape a recession, as long as we don’t follow in the footsteps of other countries.
The US central bank is currently indicating that they are prioritising fighting inflation over maintaining growth, suggesting the Federal Reserve will continue to hike interest rates until a recession is caused if that’s what it takes to bring down inflation.
With both the US and the UK rapidly hiking interest rates, Australia is pressured to do the same. But Business and Economy Editor from The Conversation Peter Martin explains that Australia has avoided recessions before and can again.
“At the right moment, Australia’s Reserve Bank would be wise to decouple from the US,” Mr Martin said.
“If the [US Federal Reserve] pushes up rates to the point where it is about to bring on a US recession, Australia would be well advised to stand back and not lift rates, letting the collapse of the US economy bring down inflation by itself.”
Credit cards last in the pecking order of financial products
Research from the University of Sydney has established a ‘pecking order of defaults’ - listing the financial products Australians prioritise when they start to feel the pinch.
The research determined the top 10 bills most at risk of defaulting and the influencers that are involved. Weighing in at number one on the risk scale comes credit cards (from a non-primary bank), with consumers preferring to sacrifice their cards over other regular bills.
Phone and internet bills had the least risk of being defaulted on out of the 10 bills examined.
“Consumers need to be aware that the consequences of defaulting on both a personal loan and a credit card are difficult to evade – even from two different lenders,” lead Researcher Dr Andrew Grant said.
Manager of Bureau Analytics at illion Michael Landgraf said this research confirms consumers make choices that immediately affect them.
“Making credit repayments on products that appear to hold the highest utilitarian value is seen as most important. Consequences, such as continued access to credit and a loss of livelihood drive these choices.”
Regional First Home Buyers Grant moved forward
The Albanese Government has announced the advancement of the Regional First Home Buyers Grant (RFHBG).
On 1 October 2022 - three months earlier than planned - 10,000 new places will be available under the grant. The grant aims to support those in regional areas looking to purchase a home with a deposit as low as 5%.
To be eligible for the grant, one of the buyers must have lived in that regional area or an adjacent area for at least 12 months prior to the execution of the home loan agreement.
CEO of the National Housing Finance and Investment Corporation Nathan Dal Bon welcomed the scheme being brought forward.
“Making it easier for more Australians to access housing is our fundamental purpose, and programs like this are even more important as aspiring homeowners cope with the increasing cost of living pressures,” he said.
Australia’s favourite banking apps revealed
New data from Sensor Tower (via savings.com.au) has revealed that Generation Z is surprisingly still preferring banking apps from the Big Four banks, while millennials are all aboard the neobank train.
Data shows that Gen Z ever so slightly prefers big banks over neobanks, which could be due to parental preferences and lack of financial independence. As for millennials, not only did the preference for neobanks overtake traditional banking apps by a landslide, but it was also the only age category to see neobanks as the preferred app.
In terms of total banking app downloads, Commbank has remained the top dog, with around 40k downloads last month. Coming in as runner-up is ubank (owned by NAB), surpassing the other three big banks. This overtaking could be attributed to their interest rate reflecting the rising cash rate, something the big banks have not been as generous with.
Check back next week for another wrap on the week’s biggest finance stories.
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