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2020 has provided enormous economic challenges for Australians – and for some more than others, with many households and businesses set to face financial challenges on the long road to recovery.
So, there has never been a more relevant time to consider what this has meant for the financial consciousness of Australians.
The 2020 Financial Consciousness Index, produced in conjunction with Deloitte Access Economics, provides an insight into how COVID-19 has impacted Australians’ financial consciousness – a measure of the extent to which a person is not just financially literate, but also whether they are conscious of their ability to affect their own financial outcomes, their willingness to act, and the extent to which they are able to participate in sophisticated financial matters.
Overall, those who have been hit hardest by the economic downturn are those least prepared to cope with the losses.
On average, Australians whose jobs have been directly impacted by COVID-19 – such as those laid off or receiving JobKeeper – have lower financial consciousness than those who remain in employment. Similarly, Australians employed in industries hit hardest by COVID-19 – such as in accommodation and food services and arts and recreation services – also had, on average, lower financial consciousness.
Chart: Job losses across industries due to COVID-19
Source: ABS 5676.0.
While financial consciousness tells part of the narrative, it is also important to understand how Australians are coping more broadly – a story better told through financial wellness and sentiment.
Financial wellness has still increased for some since last year, and been supported to some extent by an increase in savings and resilience, due to more conservative spending behaviours and increasing social assistance payments through schemes like JobKeeper and JobSeeker. Unsurprisingly, those who lost their jobs due to COVID-19, and those not in the labour force, were the groups that were the least financially ‘well’, on average. Hence, the federal government’s commitment to extend those programs through to March 2021 will provide ongoing and significant support.
Financial sentiment has taken the greatest hit due to COVID-19 – with 64% of Australians lacking confidence in 2020, up from 51% in 2019, as people have been forced to become more aware of their finances.
While the federal government has been able to support financial wellness through its massive social assistance programs, they have not necessarily been able to do the same when it comes to financial sentiment.
So, despite how well Australia has managed to mobilise quickly in response to COVID-19 to avoid large-scale welfare losses, it is clear that low-income earners and the unemployed remain most at risk through the long recovery period ahead.
The 2020 Financial Consciousness Index reveals that while COVID-19 has put the financial consciousness of Australians on high alert, sentiment will likely recover over time as conditions begin to improve. And results already show that, in spite of everything 2020 has thrown at us, Australians do remain optimistic about the future.
David is a macro economist with extensive experience in applied economic and quantitative analysis of the Australian economy, along with considerable experience in labor market analysis. David is a regular commentator on macroeconomic trends, and prepares a weekly economic briefing newsletter.
Nathan Brierley is a Senior Economist in the Economic Analysis and Policy team at Deloitte Access Economics. Nathan is experienced in business case development, cost-benefit analysis, Computable General Equilibrium (CGE) modelling and other economic analysis specialising in transport and infrastructure.