Losing traction: lessons in financial wellbeing from the COVID crisis

Our analysis of financial wellbeing over three time periods finds that Australians on low incomes are more exposed to risks, making them vulnerable to a crisis such as the COVID-19 pandemic.

At a glance

As Australia begins to reopen and the hope blooms that life will return to normal, it is easy to feel that the worst of the COVID-19 crisis is over. However, our research suggests recovery for people on low incomes will be slow. For some the financial impacts from COVID will likely be long term.

Dive deeper

We use ANZ's Financial Wellbeing Indicator, which draws on multiple questions in the continuous Roy Morgan Single Source survey. The Indicator brings together three dimensions based on Kempson and colleagues’ (2017) model of financial wellbeing. These include the ability to meet everyday commitments, feeling comfortable about one’s financial situation and resilience to financial shocks.

Our latest research analysed ANZ Roy Morgan Financial Wellbeing data from the pre-COVID period (April 2018 to March 2020), through the 2020 COVID peak (April 2020 to September 2020) and the initial recovery (October 2020 to March 2021).

Less secure work and an inadequate and conditional social safety net have reduced public protection from financial shocks while making it harder for many individuals to build their own protective savings buffer. Our analysis shows the COVID crisis impacted financial wellbeing as follows.

Income support recipients got a brief reprieve from poverty, which ended as temporary income supplements were wound back:

• Unemployed workers on JobSeeker reported a 10% improvement in meeting commitments in the 2020 COVID peak, then a 19% decline.
• Single parents not in employment entered the crisis with Meeting Commitments scores 43% below the Australian average. These rose by a modest 2%, before falling by 16%.
• Disability Support Pensioners not in employment) benefited from lump sum economic support payments, increasing their ability to meet commitments by 14% during the high COVID period of 2020, then falling back by 15%.

Many low-income workers missed out on support, with long-term consequences:

• 52% of workers in the lowest 20% of households by income reported losing employment, work hours or income due to COVID, compared to 28% of workers in the top 60% of households by income. This led to a 19% fall in ability to meet commitments from the pre-COVID period.
• The percentage of male workers with debts in the bottom 20% of households by income increased by 18 points to 58%. Women in the same group showed a 5-point increase in the percentage with debt to 48% and a net decline in those with superannuation by 7 points.

Stopping the downward spiral of financial stress requires a decent social safety net, access to quality employment that allows people to build their own resilience, and a robust social infrastructure base that delivers dignity and opportunity.

This report is part of the Financial Lives in Uncertain Times project. The research was made possible by the generous support of ANZ through the ANZ Tony Nicholson Fellowship and the provision under licence of Roy Morgan Single Source Survey data.