Startling proof Australia is totally stuffed

From record-high rents to skyrocketing mortgages, a cost-of-living crisis to the alarming emergence of a ‘working poor’ population, the country faces an unprecedented storm of factors putting pressure on millions of people.

And very few Aussies are immune.

“We’re seeing a new demographic of people turning to charities for support over the past 18 months,” a spokesperson for St Vincent de Paul Society in New South Wales said.

“It has been very concerning to see a growing number of people in employment and families on dual incomes reaching out in a time of desperation because of the cost of living.”

Whether paying a mortgage or renting, working for someone or running a business, earning a little or making a lot, this is a startling look at just how tough things are right now.

Skipping meals or not eating at all

An estimated 3.7 million households are battling serious levels of food insecurity, not-for-profit Food Bank revealed in its 2023 Hunger Report.

Food insecurity describes the need to make “unenviable choices about what and when they eat” such as skipping meals or going whole days without eating.

Foodbank’s research shows an extra 383,000 households are grappling with food insecurity than a year ago.

More than a third of the population – more than the total number of households in Melbourne and Sydney combine – are having to “compromise their meal choices”, the organisation said.

The proportion of Aussies who are experiencing “some level of distress in meeting the most basic needs” when it comes to putting food on the table is racing towards 50 per cent.

“Food insecurity is waking early and sending your child off to school with a rumbling tummy and empty lunch box because you’ve been forced into an impossible choice between paying the rent or buying food that week,” Foodbank chief executive Brianna Casey said.

“Food insecurity is living at home alone as a pensioner, convincing yourself that three meals a day is a luxury, and that two – or even one – will suffice.

“Food insecurity is rushing to the fruit platter at a working lunch in the office because fresh fruit and vegetables have become a treat, rather than a dietary staple.

“Food insecurity is now having a mortgage, a full-time job and a side hustle, yet food is a discretionary spend in the household budget.”

Cutting dangerous corners

As the country brazes for a particularly hot summer, the Australian Council of Social Services warns vulnerable households will go without cooling as a result of cost pressures.

An ACOSS survey released in October shows 74 per cent of people on income supports are slashing spending on cooling, while 62 per cent are cutting back on the use of lighting.

“As we head into a summer of extreme heat, the federal government needs to deliver a substantial package to urgently address energy affordability for people on low incomes,” ACOSS program director of climate and energy, Kellie Caught, said.

“Energy is an essential service, one which has serious implications for people’s health and wellbeing.”

Meanwhile, a recent Australian Bureau of Statistics data release shows seven per cent of people who needed to see a doctor in the 12 months to June delayed the visit or didn’t go at all because of cost-of-living pressures.

“This was double the number compared to 2021-22, when 3.5 per cent of people put off or did not see a GP when they needed because of the cost,” Robert Long, head of health statistics at the ABS, said.

One-in-five people delayed or avoided seeking mental health treatment because of the cost, while 10.5 per cent of patients needing to see a specialist didn’t due to price pressures.

“There was also an increase in people who delayed or didn’t get prescription medication when needed due to cost, from 5.6 per cent in 2021-22 to 7.6 per cent in 2022-23,” Mr Long said.

On top of that, home insurance premiums surged by 28 per cent in the past year, representing the steepest increase in 20 years.

That’s raised concerns among experts that struggling households may abandon insurance because they can’t afford it.

Sharanjit Paddam, a principal with Finity Consulting, said the proportion of “affordability stressed” households – those that spend more than one month’s worth of their gross annual income on home insurance – rose from 10 to 12 per cent.

Small businesses on the brink

Olvera Advisors specialises in small business debt restructuring and is currently receiving 10 to 15 inquiries a day from operators who are struggling or already in trouble.

Struggling business owners are from a range of industries, from hair salons to tradies, with debts of up to $1 million, the firm’s principal Damian Hodgkinson said.

“We’ve seen a rise in the number of businesses struggling over the past 12 months, but more recently we’ve seen a shift in the types of businesses feeling the pressure,” Mr Hodgkinson said.

“We’re seeing in the past six months that high-end enterprises, which have been quite resilient, are also starting to run into trouble.”

Olvera works predominantly with family owned businesses and small-to-medium enterprises.

Many operators have been smashed by rapidly rising interest rates as well as supply side inflation, which is higher import and materials costs, transport and fuel hikes, and the weaker Australian dollar.

“And, of course, now people are really starting to spend less,” Mr Hodgkinson said.

From an economic perspective, he believes “we’re sitting in probably the worst combination of factors that we’ve ever seen”.

Data from the Australian Securities and Investments Commission shows there have been 515 small business restructuring appointments across 2023, reinforcing the Olvera’s observations.

Equifax, the country’s largest provider of credit information and analysis, said businesses are clearly experiencing financial stress.

Insolvencies and late payments are on the rise while more small-to-medium businesses and sole traders are experiencing mortgage stress.

“We are increasingly seeing signs of stress on Australian businesses,” the agency’s boss of Commercial and Property Services Scott Mason said.

“This is evident not only in our commercial data, but also when we look at the people behind the business. “

Crushed by mortgage repayments

Since the Reserve Bank began hiking interest rates back in May last year, the cost of meeting repayments on the average size mortgage has soared.

Those with a home loan balance of $590,000 – the national average – are forking out $1345 more per month, or an extra $16,140 per year.

“That’s a huge amount of extra money to be spending on your mortgage, especially when the cost of almost everything else is also going up,” Graham Cooke, head of consumer research at finance comparison website finder.com.au said.

Even if those huge increases were happening in isolation, rates of distress would be high, but with a cost-of-living crisis on top, countless Aussies are now up against the wall.

Martin North is the principal of economic research firm Digital Finance Analytics and tracks household cash flows, with data indicating more than half of mortgage holders are in cash-flow deficit each month.

That is, half of all mortgage households are now spending more than they earn every month.

“Looking in detail, we find that recent purchasers, especially young growing families, are most exposed,” Mr North said.

Many bought when mortgage rates were sitting around two per cent, and when then-RBA Governor Philip Lowe assured people the official cash rate would likely remain on hold until 2024.

It didn’t. Home loan rates are now sitting at about six per cent.

Unprecedented renting crisis

The cost of renting a home has risen to record high levels, but that’s only part of the disaster overwhelming the millions of Aussies who lease their home.

Finding somewhere to live is a challenge in virtually all parts of the country, with demand significantly higher than supply.

Right now, the rental vacancy rate – that is, the percentage of all rented dwellings currently available – sits at just one per cent.

To put that in context, economists generally view a vacancy rate of below three per cent as a clear sign of a crisis.

If they find a place, it now costs about 8.1 per cent more than it did just 12 months ago.

But that’s the national figure, and in certain cities the increase is much sharper.

For example, the median rent price in Perth was surged by 13.2 per cent in Perth, while it’s 11.8 per cent higher in Melbourne, and 9.9 per cent in Sydney.

Things are just as challenging in regional areas, with SQM Research managing director Louis Christopher saying the historically low vacancy rate is also reflected outside capital cities.

There is no relief in sight, Mr Christopher said.

“In such an environment, the prospect of an easing in rents over the next six months is very unlikely to occur. And most likely, market rental increases will continue to rise between 10 to 15 per cent.”

The number of affordable rentals listed for $400 per week or less has almost halved in the past year, PropTrack Senior Data Analyst Karen Dellow said.

“The national median weekly rent has increased by 15 per cent, from $480 to $550, resulting in fewer new properties being listed below $400,” Ms Dellow said.

“In October, only 11 per cent of total listings were within the affordable bracket nationally, although the figure is not reflective of the affordability crisis being experienced in the cities.”

For example, just four per cent of advertised rentals in Sydney are considered affordable, down 58 per cent on the same time last year, and only 9.3 per cent of Melbourne’s rentals are affordable.

Share house demand booming

As rent prices surge and the cost-of-living crisis worsens, more and more Australians are turning to share house arrangements in search of relief.

A new survey by flatmates.com.au of more than 10,000 people found 23 per cent entered the share house market for the first time over the past year.

Almost half (48 per cent) of those with housemates can’t afford to live on their own, while 37 per cent of respondents have struggled to find somewhere to live.

“Over the past year, our audience has grown in size and diversity, and with the peak season for share accommodation at our doorstep, we expect demand for share house living to grow,” flatmates.com.au community manager Claudia Conley said.

“The challenging rental landscape and ongoing affordability pressures have seen an evolution in the typical, university student-dominated demographic seeking share house living.

“Members aged between 55 and 64 years old on flatmates.com.au were the fastest-growing demographic in the past year, recording a 21 per cent annual increase.

“Those aged between 65 to 74 were the second-largest growing demographic, rising 13 per cent since last year’s survey.”

Runaway house prices

Despite the rapid rise in interest rates, property prices continue to grow across most of the country.

Nationally, home values have jumped by 7.2 per cent over the course of the year – not including any growth seen in November, according to research firm CoreLogic.

CoreLogic data shows 82.4 per cent of Australia’s 4506 suburbs saw dwelling values increase in the three months to October.

Over the past year, dwelling values are up by 10.8 per cent in Perth, nine per cent in Sydney, 7.8 per cent in Brisbane, 6.5 per cent in Adelaide, and 2.4 per cent in Melbourne.

The only capital cities to see declines are Hobart (down 4.9 per cent), Darwin (down 1.7 per cent), and Canberra (down 1.6 per cent).

Dream of buying a home dwindling

Analysis of the 22,000 home sales recorded in October has unveiled a “disconcerting” reality facing many hopeful buyers, data firm Suburbtrends reported.

The study highlights that Australia’s median home price is now nine times the average annual income – three times the international benchmark of three.

“In Australia, homeownership is increasingly becoming a domain for the affluent,” Kent Lardner, chief analyst at Suburbtrends, said.

Meanwhile, analysis by finder.com.au shows a person needs to earn at least $182,000 to afford the average Aussies house, while for units, the salary needed is almost $130,000.

That’s considerably more than the average full-time salary, currently sitting at $96,000.

Of course, those figures are calculated using the national median dwelling values, with the situation even more in dire in cities with higher home prices.

Blowing through savings

During the Covid years, a huge number of Aussies took the opportunity to build up healthy savings buffers.

But a stark report from AMP recently revealed the firm expects “accumulated savings to be mostly exhausted by late 2024”.

Data from the Australian Bureau of Statistics shows the household saving ratio declined to 3.2 per cent in the June quarter. It’s now at its lowest level since mid-2008 in the midst of the Global Financial Crisis.

Meanwhile, data from the RBA shows excess payments on mortgages, mostly into offset accounts and redraw balances, have fallen to $3.4 billion per quarter, a 78 per cent decline from a peak in September 2021.

A panel of economic experts maintained by finder.com.au overwhelmingly concluded that households are eroding their savings to meet mortgage repayments.

“It’s a short-term financial solution that can lead to long-term financial stress,” Mr Cooke said.

Wage growth not what it seems

The latest Wage Price Index jumped by 1.3 per cent over the September quarter, representing the largest increase in its 26-year record.

Treasurer Jim Chalmers last month trumpeted sharp growth in wages and claimed the average full-time worker is now $3700 a year better off under Labor.

Given he served as chief of staff to former Treasurer Wayne Swan and was executive director of the Chifley Research Centre, and holds a PhD and first class honours degree, Dr Chalmers would be aware that his claim is heavy in spin.

In truth, all things considered, real wages have collapsed by 7.5 per cent since mid-2020 and are now at a level not seen since early 2009.

And after a period of growth during the Covid era, when many Aussies benefited from government stimulus relief, household disposable income per capita has fallen back to where it was in early 2019 – where it hadn’t really budged for almost a decade.

In fact, data released earlier this month by the OECD shows Aussie households have seen the largest fall in living standards of any advanced economy in the past 12 months.

Household incomes fell by 5.1 per cent in the 12 months to June – the largest fall across all OECD nations.

Living off credit cards

An increasing number of Australians are turning to credit cards to cope with rising costs, Tammy Barton, founder and director of MyBudget, said.

“Turning to credit options is definitely not a viable long term solution for households,” Ms Barton said.

“Living off credit, and particularly not paying it off in full at the end of the month, does mean that you are living beyond your means. Essentially, you are spending more than what you are earning, and that can eventually lead to people finding themselves caught in a debt spiral.”

A finder.com.au survey revealed 15 per cent of Australians – equivalent to three million people – have taken out a credit card in the past 12 months.

Amy Bradney-George, credit card expert at finder.com.au, said as costs rise, more people are reaching for plastic as a solution.

“Credit cards have become a financial crutch for a lot of people who would have previously only used one for emergencies,” Ms Bradney-George said.

“Mounting pressure on households is seeing Aussies borrowing money to keep afloat.”

During the Covid years, Aussies capitalised on higher levels of disposable income to pay down credit balances, which fell by a combined 38 per cent between the start of 2020 and mid-2022.

But that trend is largely over and the majority of credit card holders are back to spending at pre-pandemic levels.

In July, monthly credit card spending hit $34.4 billion, according to RBA data. That represented a 9.6 per cent increased year-on-year.

Everything costs more

The RBA’s latest inflation figures show Australians are forking out more and more for essential goods and services.

Electricity prices surged 12.7 per cent and gas prices jumped 12.9 per cent in the 12 months to August. Fuel prices leapt 13.9 per cent in the month, with unleaded petrol prices averaging about $2.11 per litre.

Michelle Marquardt, head of prices statistics at the ABS, said pantry staples are up sharply.

“Prices for bread and cereal products and dairy products have risen over 10 per cent in the past 12 months,” Ms Marquardt said.

September quarter data paints an equally grim picture.

Bread prices were 12.6 per cent higher than a year ago, egg prices were 7.9 per cent higher than a year ago, and dairy products were 10.2 per cent higher than a year ago.

Corporate profits skyrocketing

While working Aussies struggle and the cost-of-living crisis worsens, big business is “popping champagne corks celebrating eye-watering profits”, Australian Council of Trade Unions secretary Liam O’Brien said.

“Corporate profits have grown over the last two years while real wages have fallen,” Mr O’Brien said.

“Workers are falling behind while superyacht sales are on the increase. Big business has the audacity to lecture workers on pay restraint and opposing calls to pass legislation that will get wages moving, all because they want to protect their mega profits.

“Electricity, rents, fuel, and even our most basic staples such as bread and butter cost significantly more than they did a year ago. These are essentials, not luxuries, there’s no more give in the system. It’s not demand that’s driving these increases, its mega profits.

“This is profit-driven inflation, plain and simple.”

People working multiple jobs

Mr North said his data shows a “proliferation of households working multiple jobs” just to make ends meet.

His observations are supported by ABS data, which indicates a record 959,000 people worked multiple jobs in the June quarter, up almost 7 per cent since last year.

Women and young people are the most likely cohorts to take on additional work.

The healthcare and social work sectors are most likely to have the highest number of workers with two or more jobs.

A booming population

When Australia reopened its international border to migrants in July 2022, streams of foreigners flocked here to work, study and settle.

By March 2023, annual population growth hit a whopping 2.17 per cent – the highest level since 2008.

Net overseas migration – the number of people arriving minus the number of people leaving in a year – is at a record high of 454,000. That’s more than double the pre-Covid decade average.

Eliza Owen, head of research at data firm CoreLogic, said fluctuations in overseas migration most immediately impact the rental market.

“ABS data on permanent migrant settlement outcomes showed 60.8 per cent of migrant arrivals in the five years to 2021 were renters,” Ms Owen said.

Data from realestate.com.au shows “skyrocketing” interest in Aussie property from overseas searchers.

“Both buy and rent searches are now well above pre-pandemic levels and are set to continue rising now that migration has returned to previous levels,” Ms Dellow said.

Searches from abroad for homes to buy surged 11.5 per cent in the three months to October, while rent searches jumped by 7.8 per cent.

Rental searches from China are nearly double the volumes seen before the pandemic.