Australians are still feeling the financial pinch and are more vulnerable to potential unexpected costs

Taking the Pulse of the Nation (TTPN) surveys the Australian population to capture their sentiments and behaviours related to current economic and social issues.

Since 2020, the Taking the Pulse of the Nation (TTPN) survey has collected compelling information on the changing behaviours and attitudes of Australians. Together, Melbourne Institute and Roy Morgan understand the value in capturing the voices of Australians on the issues that matter right now. We use this information to create expert analyses to directly inform social and economic policies for our Nation.

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Australians are still feeling the financial pinch and are more vulnerable to potential unexpected costs

Poverty is a state. Being financially vulnerable increases one’s risk of falling into poverty.  Over the past year inflation has dropped from a high of over seven to eight percent in late 2022 and early 2023, to current rates of less than four percent. Rising housing prices, utility bills, medical bills, and everyday expenses like food have been contributing to an increased risk in Australia for people becoming vulnerable and falling into poverty.

Using the February Taking the Pulse of the Nation (TTPN) survey data, we examine cost-of-living challenges based on residents in a high-, medium-, or low-poverty community. We find that regardless of community type, financial challenges remain high across the board. High and medium-poverty communities report higher rates of food challenges compared to low-poverty communities.

For all other challenges (housing, utility bills, and medical needs) there is a high share of individuals across all communities reporting such challenges. The number of individuals reporting these types of challenges is higher compared to 2023.

Cost-of-living challenges are prevalent across all communities

Based on 2021 poverty rates (ABS Census Data) for the geographies that capture communities that reflect household interaction socially and economically, we organised these communities into three groups: low poverty (5-14%), medium poverty (14-20%), and high poverty (20-53%).

One would expect to observe a higher share of residents reporting higher cost-of-living challenges in communities with higher poverty rates. In February 2023 (For all research findings quoted above see Figure 1 – on the Melbourne Institute TTPN website portal), this was mostly the case.

Those living in higher poverty communities reported higher shares of challenges for food, utilities, and medical needs. In February 2024, except for food challenges, approximately 25 percent of respondents reported challenges related to utilities and medical issues.

In addition, seven percent indicated they were behind in their rent or mortgage payments. For utility bill challenges, respondents in medium and low-poverty communities have caught up to the rates reported in February 2023 for the higher-poverty communities. For medical issues, across the board, there has been an increase of two to four percentage points between 2023 and 2024.

Reports of food challenges have dropped for all communities, but the rates are still highest for the low and medium-poverty communities. As reported by the Australian Bureau of Statistics recently, Australians are consuming less fresh food and milk. This suggests that Australians grappling with food challenges are adapting to their circumstances, rather than experiencing improved circumstances.

Cost-of-living challenges are strongly associated with reports of mental distress

Are there potential spillover effects from facing financial challenges? Figure 2 (available to view on the Melbourne Institute TTPN website portal) depicts differences in reports of mental distress by community and if individuals have reported at least one cost-of-living challenge.

Across all communities, approximately 60 percent of respondents who claimed a cost-of-living challenge reported feeling anxious or depressed at least some of the time. Yet 15-25 percent of respondents reported feeling anxious or depressed, at least some of the time, if no cost-of-living challenge was reported. In 2023, there was variation in the report of mental distress across communities based on poverty rates.  By 2024, the highest rates of mental distress are reported for those in medium-poverty communities, followed by those in higher-poverty communities.

Cost-of living-challenges has reduced “saving for a rainy day”

As inflation rates and prices go up and down, are cost-of-living challenges simply transitory or are there potentially longer-term effects? In Figure 3 (available to view on the Melbourne Institute TTPN website portal), we report the responses to the question of how one would cover an emergency expense of $3,000 if it occurred in the next month.

Respondents were asked to identify their main source of funds to cover such an expense.

Respondents who report no cost-of-living challenges are saving for a rainy day. Nearly 90 percent indicate they could draw on savings or assets to cover an emergency expense. In contrast, only 35 to 40 percent of respondents experiencing financial challenges related to food, utilities or medical needs indicate they would draw on savings or assets. This share is even lower for those who reported being behind in rent or mortgage payments.

The share of respondents reporting they would not be able to cover an emergency expense is alarmingly high (15 to 20 percent) for those identifying cost-of-living challenges. Also noteworthy is the use of loans or credit cards.

Comparing this information to our previous work from 2023, the share of respondents with cost-of-living challenges who report being able to cover an emergency expense with savings has fallen by six to eleven percentage points.

The cost-of-living crisis has exacerbated financial vulnerability among Australians. Across all communities, challenges related to housing, utility bills, and medical needs have intensified, even surpassing levels seen in 2023. The increase in financial vulnerability not only increases the risk of falling into poverty but also has other potential consequences for mental well-being. The measures included in the 2024-25 Budget to address cost-of-living would hopefully provide the required assistance to those individuals most in need.

Authors: This Taking the Pulse of the Nation insight was authored by Dr. Ana Gamarra Rondinel, Research Fellow at the Melbourne Institute, Professor A. Abigail Payne, Director of the Melbourne Institute and Ronald Henderson Professor, Dr. Ferdi Botha, Senior Research Fellow at the Melbourne Institute and Dr. Ujjwal KC, Research Fellow at the Melbourne Institute, on 11 June 2024.

Contact: melb-inst@unimelb.edu.au.

About Taking the Pulse of the Nation (TTPN):

*This report is based on 1,006 respondents from data collected in February 2023, and 1,178 in February 2024. We thank OzHarvest for covering the inclusion of additional questions in the February 2023 survey.

We define facing food challenges if, during the last 3 months, because of a shortage of money, respondents skipped meals or ate less generally, or less fresh or nutritious food. Respondents are facing challenges paying the rent or mortgage if they are currently behind on rent payments (if renting) or mortgage payments (if currently paying off a mortgage).Respondents are facing challenges with utility bills if, during the past 6 months, because of a shortage of money, they couldn’t pay electricity and/or gas bills on time or were unable to heat and/or cool their homes to a comfortable level. Respondents have medical issues deferred or delayed if, during the past 6 months, because of a shortage of money, respondents didn’t see or delayed seeing a GP or medical specialist, or weren’t prescribed, or delayed getting prescription medication.

We divide the communities into three roughly equal groups based on the poverty rate calculated using ABS Census (2021) data for the geography known as SA2: "Low-Poverty Communities" (poverty ranges from 5 to 14 percent), "Medium-Poverty Communities" (poverty rate ranges from 14 to 20 percent) and "High-Poverty Communities" (poverty rate ranges from 20 to 53 percent).

To measure mental distress, respondents are asked: “During the past week how often did you feel depressed or anxious?”. We define mental distress as feeling depressed or anxious “all or most of the time”. Respondents can also indicate “some of the time” or “little or none of the time” for these feelings. Experiencing challenges implies that the respondent faces at least one of the studied challenges, i.e., food, housing, health, or utility.

We define “No challenges” or “Without challenges” if, respondents did not report any challenges. Respondents “With challenges” are those who faced at least one challenge,

To measure financial resilience, respondents are asked: “Imagine that you have an emergency and you need to pay $3,000. What would be the main source of money that you would use to come up with $3,000 within the next month?”. Responses are classified into six categories: (i) not able to cover, (ii) government support, (iii) borrowing through loans or credit cards, (iv) borrowing from family or friends, (v) working more hours, (vi) draw on savings/assets.

**Beginning in April 2020, the Taking the Pulse of the Nation (TTPN) was conceptualised and implemented by a group of researchers at the Melbourne Institute: Applied Economic & Social Research.

In 2022, the Melbourne Institute and Roy Morgan formed a partnership to extend the running of the TTPN. Each wave includes a set of core questions, as well as additional questions that address current and emerging issues facing Australians.

The TTPN sample is stratified to reflect the Australian adult population in terms of age, gender, and location. The TTPN Survey uses a repeated cross-sectional design. If you are interested in adding questions to the survey or accessing the data, please contact us at: melb-inst@unimelb.edu.au.

To view all Melbourne Institute – Roy Morgan Taking The Pulse of the Nation Reports visit the TTPN website portal: https://melbourneinstitute.unimelb.edu.au/data/ttpn.