Aussies boosted ‘rainy day’ funds by almost 50% during COVID in expectation of economic shocks 

The financial wellbeing of Australians remains remarkably higher than before the pandemic hit, with continued precautionary savings behaviour resulting in Australians’ savings balances sitting 46 per cent higher than two years ago.

According to a report from the Melbourne Institute: Applied Economic & Social Research and Commonwealth Bank, precautionary savings played an important role in stabilising Australians’ financial wellbeing at a time when cautious optimism about the economy slid into mild pessimism in the first three months of 2022.

“Australians are responding sensibly to what’s happening around them in the economy. Driven by concerns around inflation and its impact on household spending, as well as the impacts of mortgage repayments, Australians have continued to grow their savings’ safety nets and curb spending at a sustained pace,” Professor John de New from the Melbourne Institute said.

Released today, the latest Australian Consumer Financial Wellbeing Report analysed the aggregated transactional data of more than five million CBA customers for the 2022 March quarter to better understand the current financial wellbeing of Australians.

The report applies a unique methodology from the Melbourne Institute and CBA, which combines five major indicators of financial wellbeing to produce a single score, from zero (low) to 100 (high) calculated on 12 months of data. As at March 2022, the average observed financial wellbeing score was 50.0 out of 100, down 1.1 points from the peak in March 2021 - but 2.6 points higher than two years ago.

Ben Grauer, CBA’s Head of Financial Wellbeing said: “We can see from this latest report that for many Australians, building a savings buffer appears to have helped offset external pressures that could have otherwise undermined their financial wellbeing.

“Having this kind of deep and ongoing understanding of what affects customers’ financial wellbeing is critical. This report gives us an unparalleled view of Australian society and the extent of Australians’ financial obligations, financial freedoms and control, and their sense of financial security. In turn, it helps us develop the right digital experiences and features to help customers improve their financial wellbeing with easier ways to manage their money.”

Professor de New also said: “The proportion of Australians experiencing poor financial wellbeing outcomes has increased slightly year-on-year. However, we see a more positive outlook when we compare these figures against reported outcomes in March 2020, with a significant 4.0 point improvement in the proportion of Australians who are just coping or having trouble with their finances.

“Despite the pandemic, many Australians experienced quite healthy monthly inflows of income during this reported period. When we look at this measure alongside what is happening in our economy and the elevated levels of precautionary savings being accrued, it tells us that Australians are doing the right thing and preparing for possible impacts to their finances.”

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Things you should know

• This edition of the Australian Consumer Financial Wellbeing Report provides a nationally representative view of Australians’ financial wellbeing, and the annual rate of change for the period March 2021 – March 2022.
• Commonwealth Bank of Australia (CBA) and the Melbourne Institute (MI) have jointly developed the MI Financial Wellbeing scales used throughout this analysis. In cooperation with CBA, the MI interprets levels and trends in the Financial Wellbeing bank-record data produced by CBA in the context of main macro-economic indicators.