Almost one in three are struggling to get by on their current income, leaving them increasingly distressed and disenchanted with the country's direction, an ANU study has found.
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More than 30 per cent of people are finding it difficult or very difficult to live on their current income, with the financial pain deepest among those 54 years and younger, particularly those renting or with a mortgage, according to the ANU poll of 4200 people taken earlier this month.
The report's authors, Nicholas Biddle and Matthew Gray, said financial distress was now higher than at any time since February 2020, and was being felt particularly by those on low and middle incomes as well as those from disadvantaged groups such as Aboriginal and Torres Strait Islander people.
"While on some measures Australia has performed better than some of its counterparts during these challenging times, our results show that many people on the ground are doing it really tough," Professor Biddle said.
"There are particular age groups who have borne the brunt of price rises and stagnant incomes," he said.
Those aged 35 to 54 years reported being under the greatest financial stress, followed by those 34 years and younger, while anxiety about finances was lowest among the plus-75s.
The findings, coming less than a week after the release of the federal government's Intergenerational Report, are likely to sharpen the focus on age disparities in wealth and opportunity, particularly in the areas of housing and taxation.
The ANU study found that renters were under the greatest financial stress, with almost 16 per cent reporting it was very difficult to make ends meet, compared with 8.9 per cent of mortgage holders and less than 5 per cent who owned their own home.
Tellingly, the report finds that after-tax household income, adjusted for inflation, has declined since before the pandemic, highlighting the destructive effect of rising prices on material wealth and wellbeing.
People have responded to the financial pressure in several ways to reduce their spending. More than one in five reported renegotiating bills other than mortgages, almost 60 per cent said they had cut back on groceries and other essential items, slightly less than half reduced spending on discretionary goods and 54 per cent indicated they had postponed a major purchase.
Those aged 25 to 34 years were the most likely to have reduced spending, followed by 35 to 44-year-olds. Those aged over 65 years were the least likely to have curbed their expenditure.
The authors said more were also accessing their superannuation early. The proportion doing so had increased to 7.2 per cent from 5.9 per cent just eight months ago.
The picture of significant financial stress being experienced by a large segment of the population reflects official figures showing household spending has weakened sharply this year under pressure form rising prices and high interest rates.
Retail turnover has slowed to its weakest pace in two years, which has contributed to softer price pressures. The pace of inflation dropped to an annual rate of 4.9 per cent in July after reaching above 8 per cent late last year, adding to evidence that high interest rates are working to constrain demand.
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But the success of efforts to lower inflation is coming at a heavy cost for many Australians, according to Professor Biddle and Professor Gray.
"This difficult economic climate may be having a serious impact on the wellbeing of Australians," they said.
The researchers reported that levels of psychological distress had soared earlier this year to levels not seen since the delta wave of the pandemic and had remained there.
This has coincided with a marked deterioration in people's view of how the country was heading.
Satisfaction with the direction of the country declined "quite precipitously", reaching 63.8 per cent, the ANU researchers said, "not much above the low observed during the Black Summer bushfire crisis".
"Satisfaction with the direction of the country is approaching the levels we saw just before the federal election, which will be a worry for the prime minister and his first-term government," Professor Biddle said, though its was unlikely to impact the two party preferred vote until "there is distance between the current Opposition and the former government".