As the RBA holds its first board meeting of the year, income inequality and economic anxiety are already on the rise in 2017, according to the latest survey of financial life inside Australian households.
While a range of economists have urged the RBA to stay their hand this week, ME Bank has tracked further drops across Australian incomes, a growth in financial disparity, as well as the highest levels of job insecurity yet recorded by the bank's Household Financial Comfort Report.
With under-employment dragging on the national economy, the biannual report shows two-thirds of part-time workers want to work more, with some seven out of ten Australian casual workers still looking for more hours or to go part-time.
Asked if the income disparity would impact the RBA's first rate meeting today, vice-chancellor’s fellow at the University of Tasmania, Saul Eslake told AB+F while the RBA is aware of a growing gap between households - it publishes data on income distribution (co-sponsor of the Household Income and Labour Dynamics Australia or HILDA Survey), as well as a recent discussion paper - there are other pressing considerations at hand.
“Although they haven't said so explicitly, I think the RBA would take the view that issues concerning the distribution of income and wealth are matters for fiscal policy (taxation and spending), and that there is not any role for monetary policy there,” Eslake said.
Clear, widening partition
ME Bank is now seeing a clear and widening partition dividing Australian households between the minority that describe themselves as financially comfortable and the now more than half of Australians surveyed that report financial discomfort.
“The rich appear to be getting richer, while the rest of Australia is struggling – there’s a divide across households,” ME consulting economist and co-author, Jeff Oughton told AB+F.
Households earning an annual income above $200,000 reported very high overall financial comfort of 7.10 out of 10 in December, compared with ME’s overall household financial comfort index (5.41 out of 10).
According to the survey, almost 50 per cent of those earning more than $100,000 reported gains compared to 17 per cent of households on less than $40,000 (32 per cent of households reported income gains in 2016 compared to 38 per cent in 2016). One-in-three Australians reported income gains, dropping by six per cent from the previous year.
According to ME Bank, single parents have the lowest levels of financial comfort (4.34 out of 10).
“Things are pretty tough when you dig below the average for Australian households,” Oughton said. ”The jobs are coming with pay cuts, fewer hours and most of it's falling on the lower-income households.”
Meanwhile, HashChing has surveyed a cross section of its broker network ahead of today’s RBA board meeting with more than 85 per cent of brokers saying rates will stay on hold in February, while 65 per cent of brokers predicted rates will rise sometime in 2017.
According to HashChing, brokers agreed the most important factor people look for in a home loan is interest rate, beating considerations such as flexibility, customer service and a bricks-and-mortar presence from the lender.
A ME Bank spokesman said recent reports of an increase in mortgage application numbers across the market was not of major significance, noting housing credit growth is generally around 5 per cent.
“There’s also been lots of talk about the potential for rates to go up and some banks moved rates up toward the end of last year - for example fixed rates - some consumers may have been seeking home purchases and corresponding loans before any other rate rises.
“Spring is always peak time with people trying to get homes sorted prior to end of year, which usually bumps up the applications and speeds people’s requirements to settle before Christmas.
“I do note ME’s own settlement volumes were about two times system growth during November and December last year – a record for us – but that was due to the competitiveness of our offer at the time and the speed at which we are now processing applications,” the spokesperson said.