New research reveals one in four Australian consumers are dipping into their savings or going into debt to maintain their lifestyles, but businesses appear unfazed by consumers’ increasingly tight finances.
Business research firm CoreData recently surveyed 1,022 Australians earning at least $80,000 a year. The survey reveals almost 15% of respondents are drawing on their savings, while a further 10% are running into debt, as consumers struggle with rising living costs.
According to the survey, almost half of respondents believe their financial situation will worsen, while 46% say they are worse off than a year ago.
The research suggests consumers’ financial situation may be worse than initially thought, as they contend with rising utility prices, a new flood levy and health insurance premiums.
Meanwhile, separate CoreData research – based on the responses of almost 800 Australian mortgage holders – reveals 25% of respondents are struggling to meet loan repayments.
According to CoreData principal Andrew Inwood, much of the uncertainty can be traced back to Australia’s minority government, which is leaving consumers increasingly pessimistic about their financial outlook.
“Consumer sentiment is back to where we were immediately after the GFC of 2007,” Inwood says.
“The lack of clarity and direction in the economy means that those who are able to save are putting their money into cash rather than shares and property. But more and more of those who can’t save are running into debt simply to maintain their lifestyles.
“If you’re starting a business, be careful about the sector you’re entering. If you’re entering the retail sector, you really need to be a low-cost provider.”
However, businesses appear to be oblivious to the increasingly low morale of consumers, with another survey highlighting Australian SMEs’ ambitious growth targets for 2011.
Management consultant firm Hay Group surveyed 1,600 senior decision-makers in firms from more than 30 countries.
According to the report, Australian and New Zealand businesses are targeting growth of 6% for 2011, compared to a global target average of 5%.
In order to achieve this target, the report reveals that 60% of Australian and New Zealand business leaders are demanding an unprecedented lift in productivity.
Businesses do, however, seem realistic about this target, with 59% admitting it is a significant challenge, and 37% fearing their employees are already too stretched to deliver current business objectives.
Inwood says businesses should not ignore consumer sentiment and household finances when formulating growth strategies.
“Pressure on Australian households continues to mount… Household finances are worse off now than they were 12 months ago, jumping from 37.5% in quarter one to 46% in quarter two,” Inwood says.
“And many believe it will get worse… [Consumers are] expecting their household financial situation to deteriorate over the next 12 months.”
