Australians continue to have a bleak economic outlook – 44% of those surveyed for a new Canstar report don’t believe the government and the Reserve Bank will able to ease inflation and cost-of-living pressures in 2023.
Of the 2,157 Australian adults surveyed in Canstar’s sixth annual Consumer Pulse report, 44% gave the government and the RBA’s efforts to stall inflation a vote of no confidence, while 27% said they were slightly confident, 19% said they felt somewhat confident and only 9% described themselves as very confident.
Women also had a more pessimistic outlook than men, with 51% of female respondents saying they do not feel confident that inflation will ease in 2023, versus 37% of males.
In fact, inflationary pressures were top of mind among Australians when asked about their biggest financial worries, with 59% of respondents ranking the cost of groceries (18%), rent (11%), electricity and gas (10%), interest rates (10%), or petrol (10%) as their foremost concern coming into 2023.
This largely even spread was a deviation from previous years, according to Canstar group executive financial services Steve Mickenbecker (pictured above). He said in the past consumers had overwhelmingly ranked the cost of electricity and gas as their top concern.
Mickenbecker said this development was unsurprising, given that 67% of Australians shared that their average weekly spend at the grocery store had increased as a result of rising prices and an additional 26% have chosen to keep costs down by buying less, choosing cheaper options or shopping for discounted prices.
Mortgage costs dominate financial concerns
Moreover, the Canstar Consumer Pulse survey results showed that consumers included rising mortgage costs among their top five financial concerns for the first time since 2019. The most alarming discovery was that 48% of homeowners with a mortgage and 37% of investors with a loan were unsure of how much their mortgage interest rate had increased since the RBA started raising interest rates in May this year.
“Most Australians have come to realise that the days of ballooning wealth from rising property prices and rampant discretionary spending, both courtesy of low interest rates and inflation, are behind them for now,” said Mickenbecker. “We are living in an alien era of austerity that was owned by prior generations.”
In the report, 39% of homeowners and 27% of investors said they were not prepared for additional interest rate hikes, with the majority revealing that would have to slash their living costs in order to make ends meet.
Meanwhile, only 15% of mortgage holders said they had managed to switch lenders in the past year and were able to secure a better deal, compared to the 8% who said they tried to do this but failed, indicating that 77% of borrowers could be paying more for their loan than current market offers.
Mickenbecker said the cash rate could reach as high as 3.85% next year, pushing the average variable rate for existing borrowers up to 6.73% and adding more than $1,130 to monthly repayments on a $500,000 loan over 30 years since April.
“The repayment increase is a considerable amount for any household to fork out and while cutting back might help, one of the best ways for mortgage holders to prepare for even higher interest rates is negotiating a lower rate with their lender or switching in chase of a better deal.”
Owners optimistic about property prices
Among property owners, Canstar’s survey found that 31% were looking to sell their home or investment property within the next couple of years. The top three reasons respondents gave for why they considered selling were upsizing, downsizing, and being unable to afford higher loan repayments.
Furthermore, 49% said they weren’t concerned about Australia’s falling property prices, while 15% said they were unsure of how prices would change in the next two years and 36% expressed some worry and said they would reconsider some decisions relating to accessing their equity, buying an investment property, planning for retirement and their investment strategy.
“In fact, nearly two-thirds – 60% – of respondents expect house prices in their state to remain stable, grow or possibly even skyrocket at some point before the end of 2024,” said Mickenbecker.
“Given the contrary view of many property market experts, the confidence Australians have in stable or growing property prices is surprising. Perhaps the opinion reflects a long-term rosy view of property, which is held by the almost 70% of homeowners not planning to sell in the next few years.”
Younger Australians aiming to buy a home and seek parents’ help
The Canstar report also revealed that younger Australians have a growing desire to become first time buyers and it was the number one expense that they were saving for.
In this regard, 24% of parents said they felt obligated to help their children buy their first home, up from 21% in the previous year.
“Intergenerational equity is concerning Australians of all ages, with parents worrying that their children will not be able to afford the same access to homeownership they enjoyed,” said Mickenbecker.
“The good news is that there are many ways that parents can help even if they don’t have a mountain of savings. For a lot of families that might include helping to boost potential first home buyers’ savings by offering rent-free or reduced rent for adult children residing at the family home for longer.”
Despite parents’ willingness to help, survey findings found that the average age Australians consider “too old for an adult child to be living at home” has dropped to 26 years old from around 30 years in previous years.
“Being cooped up during lockdowns looks to have tested our tolerance for sharing with multiple generations of adults,” said Mickenbecker. “Potential first home buyers moving out of the family home earlier will only aggravate low vacancy rates and rent pressures as we move to a period of renewed immigration and tourism.”
