FOR RELEASE: May 2020
1 in 4 Australians are struggling to pay for essential services such as energy, groceries and insurance, adding to existing rent and mortgage stress
New research report explores the global response to COVID-19, with nationwide survey of 1114 Australians showing people are drawing on limited resources just to make ends meet
- 12 million Australians are concerned about the impact of COVID-19 on their financial wellbeing; 1 in 5 are ‘very’ concerned
- Almost half of Australians (49%) are taking steps to manage their household expenses including dipping into savings (28%) and using credit cards or buy-now-pay-later services (22%)
- More than 1 in 4 Australians are worried about their ability to pay rent, mortgage repayments and energy bills
- Consumers are most concerned about their ability to manage housing costs – with 37% concerned about paying rent and 27% concerned about meeting mortgage payments
- 1 in 5 Australian renters and mortgagors are taking action to manage rent or mortgage repayments; seeking better deals with mortgage providers, requesting payment assistance or missing payments with mortgage providers and property managers in May
As COVID-19 exposes the frailties within systems and across the community, Consumer Policy Research Centre (CPRC)’s new research initiative Consumers and COVID-19: from crisis to recovery uncovers the challenges that consumers are facing and presents the building blocks for those attempting to support consumers over the coming 12 months and beyond.
“We asked consumers directly how they’re faring through this crisis. 12 million Australians reported concern about their financial wellbeing in May. People are most concerned about housing costs. And we’re seeing people express concern about what happens when support measures are removed.” said CPRC CEO, Lauren Solomon.
“It is startling to see 1 in 5 Australians needing to take action to manage rent or mortgage repayments - either seeking better deals from mortgage providers, payment assistance, reducing repayments or simply missing payments entirely.”
With already high levels of household debt across the Australian community pre-COVID, the report finds people are drawing down on finite resources to manage household expenses.
“More than a quarter of Australians dipped into savings in May to manage costs. People have been cancelling ongoing services and subscriptions and using credit or buy-now-pay-later to manage household expenses”. said Lauren “We’re also seeing higher numbers of renters and younger Australians applying for early access to super relative to the general population.”
“This crisis has dealt a sudden blow to household incomes and financial security. It has amplified existing vulnerabilities and pushed people into financial distress,” said CPRC Research and Policy Director, Emma O’Neill.
“What we know is that aggregate numbers don’t tell the full story. Casual workers, young people and renters appear to be faring much worse than the general population. We must ensure we design and deliver support measures to those who need them most.” Said Emma. “That means ensuring we’re listening and responding to actual experiences on the ground.”
CPRC’s report reflects on historical lessons, exploring local and global interventions to protect consumers through the crisis. The report also presents building blocks for policymakers and businesses supporting consumers on an uncertain path towards recovery, where policy choices made now will have long-term consequences.
“Now is not the time to be throwing vital protections out the window. What we need is a modern consumer protection framework delivered alongside stimulus measures to industry to ensure that consumers and the community derive maximum benefit.”
“Consumers are central to economic recovery. Household expenditure makes up over half of Australia’s GDP.” said Lauren. “The experience and actions of consumers will ultimately determine the trajectory of our economic and social recovery over the coming months and years. Fair treatment, safety and inclusion for all Australians must be at the heart of the recovery mission."
To download Consumers and COVID-19: from crisis to recovery go to: [link]
Consumers and COVID-19 Monthly Briefings will be available at www.cprc.org.au.
Today’s report release will be followed by monthly updates on the Australian consumer experience of COVID-19 through to November 2020. Through rolling monthly quantitative surveys, CPRC is collecting and analysing the experiences, behaviours, expectations and challenges of Australians from May to October.
CPRC CEO, Lauren Solomon and CPRC Research and Policy Director, Emma O’Neill are available for interview on request.
For more information:
Please contact Darren Saffin 0411 089 209 or Jodie Artis (0414) 699 186 at Progressive PR for interviews or further data sets
Key Survey Findings – May 2020
The majority of Australian reported significant levels of concern in relation to their financial wellbeing as a result of COVID-19.
- The majority (60%) of Australians are concerned about the impact of COVID-19 on their financial wellbeing, with one in five stating they are ‘very’ concerned.
- Groups who were most concerned (either very/somewhat) include those whose income was directly impacted as a result of COVID-19¹ and casual workers.
- Metro respondents are more worried (somewhat/very concerned) about their financial wellbeing (64%) than regional (50%).
- Consumers have been most concerned (somewhat/very concerned) about their ability to pay rent (37%), mortgages (27%), energy bills (27%), followed by insurance (25%), credit/outstanding debt (22%), groceries (25%), and telco (20%).
- Groups who consistently expressed greater levels of concern in relation to their ability to pay for household expenses were those whose income was directly impact by COVID-19, casual workers and, renters and low/non internet users.
- Cost pressures and reduced incomes are resulting in difficult and distressing trade-offs.
“Reduced finances and increased cost on things like utilities and insurances have meant we have had to reduce food, medical and other costs to manage.” – self-employed mortgagor
“Insurance prices are too high for me to pay whilst still being able to afford my other bills.” – private renter with part-time employment
“If my financial situation gets worse I will have to cancel my health insurance but it's not an immediate problem.” – private renter on government income support “Making sure I have enough money for food.” – private renter on government support
Consumers are drawing on finite resources to make ends meet while taking on debt to meet household expenses. Concerns are growing about what the future holds when support measures are removed.
- Almost half of Australians (49%) are taking steps to manage their household expenses, including dipping into savings (28%); using credit cards or buy-now-pay-later services (22%); cancelling services such as insurance and subscriptions (15%); borrowing money from family or friends (7%); and/or seeking early access to superannuation (6%).
- People receiving JobSeeker payments, those with income directly impacted by COVID-19, renters, casual workers and youth are the most-likely subgroups to have taken these actions.
“The uncertainty around JobKeeper and whether after the subsidy finishes if I will still have a job or not. This is seen as high risk to lenders.” – private renter with full-time employment
“After much negotiations with my real estate, they agreed to a rent deferral. But unfortunately, I had to draw from my super just to afford the basics before I received any government assistance.” – private renter with part-time employment
“Not knowing if I will have a job tomorrow, so we can't spend any money because we don't know how long we will be employed for!” – mortgagor
Australians are taking the most action managing housing costs with 1 in 5 people seeking payment assistance, missing payments or seeking better deals from mortgage providers and property managers. Lower levels engaged utility and insurance providers (1 in 10)
- Mortgage holders (19%) and renters (18%) have taken a range of actions including switching plans, seeking payment assistance, or missing payments in trying to manage housing costs.
- The proportion of consumer taking actions with other essential services and finance providers (such as switching plans or provider, or seeking payment assistance) was generally lower – with 13% of consumers contacting telco providers, energy (10%), insurance providers (9%) and credit providers (6%).
- Generally, consumers have been most active in switching telco plans or providers (8%), followed by mortgages (7%), energy (5%) and insurance (4%).
Common problems plaguing consumers when they contact companies may play a role
Telco rated the highest among sectors for consumers having negative experiences (15%) with wait times on the phone, live chat or email considered to take too long the most common issue.
- 13% of private renters also reported negative experiences with property managers including receiving unhelpful service and long wait times. Likewise, 13% of mortgage holders reported long wait times and poor service challenges. “The uncertainty around JobKeeper and whether after the subsidy finishes if I will still have a job or not. This is seen as high risk to lenders.” – private renter with full-time employment “After much negotiations with my real estate, they agreed to a rent deferral. But unfortunately, I had to draw from my super just to afford the basics before I received any government assistance.” – private renter with part-time employment “Not knowing if I will have a job tomorrow, so we can't spend any money because we don't know how long we will be employed for!” – mortgagor 5
- Other challenges for those who engaged providers included: generally unhelpful or poor customer service experience (8% for property managers/landlords and 4% for energy and telco providers); or difficulty navigating the website or phone system (9% with telco providers and 6% for mortgage providers).
- Those with income directly impacted by COVID-19, those very concerned about their financial wellbeing, casual workers and JobSeekers were most likely to report challenges.
“Wait times for delivery of online purchases. Wait times on the phone, especially Telstra. With their call centres offshore, they were unable to help me with issues that were important to me.” – selfemployed mortgagor
“Getting through to service providers and their wait times.” – private renter with full-time employment on an income of $80,000-$89,999
“Customer service wait times are extraordinarily longer.” – private renter with full-time employment on an income above $130,000
Some sectors have been doing better than others in offering proactive assistance. Mortgage providers / property managers, energy and insurance providers appear to be helping consumers out the most at this stage.
- Mortgage providers were the most proactive in offering helpful information about payment management to consumers (17% of respondents), closely followed by both energy and insurance at 7%. Telco and credit providers weren’t too far behind though on 6% and 5% respectively.
- Proactive offers of payment plans and deferrals were most commonly made by mortgage providers (8% of respondents), followed by energy (4%). Not so proactive in this regard was insurance (3%), telco (2%) and credit providers (1%).
- Mortgage providers also led in reducing costs at 10%, insurance at 5%. Telco trailed (4%) along with energy and credit (both 2%).
- There are currently negligible (<1%) rates of energy and telco disconnections, and debt collection, unsolicited sales and payment demands across all sectors. Price jumps were also not very common: energy (2%), telco (2%), housing (1%), banking (1%), insurance (2%)
Key Report Findings
- COVID-19 has induced many shocks, and the consumer crisis is chief among them. As at June 2020 Australia is in recession. The downturn in consumer spending as a result of job loss, financial insecurity and social distancing is a major cause of the economic contraction. With household expenditure making up over 55% of Australian GDP, a hit to consumers is a hit to the whole economy. Correspondingly, a recovery in consumer incomes, spending, and confidence and trust in markets will be major drivers of the economic recovery.
- Understanding the experiences of consumers is fundamental to designing and delivering effective support measures that reach the people who need them most. To obtain these insights for policymakers, CPRC has commenced an in-depth monthly survey tracking the experiences, needs and behaviours of Australian consumers from May to October 2020. The key findings from the May 2020 survey are set out below.
- COVID-19 is amplifying consumer vulnerability, due to the scale of job loss and financial concerns, and the greater use of services such as energy and telecommunications while socially distancing. More people are finding it difficult to pay for the essentials. COVID-19 is also exacerbating family violence, mental health challenges and digital exclusion, each of which can make it difficult for people to engage with service providers and access support. And while the scale of consumer vulnerability has increased, some people are more exposed to vulnerability than others, including those working in services sectors, young people, and temporary migrants facing destitution on job loss.
- Some of the greatest consumer vulnerabilities are likely to emerge towards the end of 2020, when boosts to income support are withdrawn, the JobKeeper wage subsidy expires, savings are depleted, short-term consumer support measures end, and those who are new to financial stress begin to access support services. The period ahead requires careful policy design based on evidence of evolving consumer needs. History shows us that withdrawing consumer stimulus and support measures too soon can entrench unemployment, mute consumer confidence and prolong economic recovery.
- During the COVID-19 economic events, some business sectors are going to contract, while others will grow. Structural shifts are already emerging in the ways we consume technology, how we commute and work, and how we transact. The increasingly online orientation of the economy provides new channels for consumer spending and keeping people in work, provided we build in enduring, strong protection frameworks that engender consumer trust and confidence.
- Fairness and inclusion are essential objectives for the recovery mission. Consumer confidence and trust is not built on the back of industry stimulus, but the extent to which people experience financial security, are protected from consumer harms, have diverse needs and vulnerabilities addressed by service providers, and have confidence that consumers’ best interests are at the heart of policy, regulatory and business action.
For further information or interview with CPRC CEO, Lauren Solomon:
Darren Saffin – firstname.lastname@example.org / 0411 089 209 or Jodie Artis – email@example.com | 0414 699 186
¹Consumers whose main income source has changed since COVID began late March (from full-time, part-time, casual, self-employed or investment income) to either JobKeeper, JobSeeker, or other government income support, or now have no income.