This second paper in the Financial Lives in Uncertain Times series explores the impacts of the COVID-19 crisis and resulting policy responses on financial wellbeing.
The analysis of Roy Morgan Single Source Survey data showed that financial wellbeing for most in Australia during the peak of the COVID-19 crisis (April 2020 to September 2020) declined. Low-income workers, particularly women, were most vulnerable.
However, for others COVID came with a silver lining. The Coronavirus Supplement, an extra fortnightly payment for many receiving income support, made it easier to make ends meet in the short term, although it could not provide long-term security. Even with this supplement, many drew on superannuation or savings.
The paper explores the financial impacts of the COVID-19 crisis on vulnerable Australians, identifying the social structures that helped or hindered them during the height of the COVID-19 crisis.
The authors 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:
- respondents’ ability to meet everyday commitments
- how financially secure they feel
- and their resilience to negative shocks.
Each survey respondent is scored from 0 to 100 for each dimension, and the average of the three scores is reported as the overall Financial Wellbeing Indicator score.
For most people, the COVID crisis led to a decline in financial wellbeing, driven by a sharp fall in the 'feeling comfortable' dimension. People with low incomes, particularly those in the workforce, faced more serious declines. For example, low-income workers showed a 21% decline in ability to meet commitments from the pre-COVID period to the September 2020 quarter.
On the other hand, COVID-19 responses made it easier for those relying on income support to buy essentials and pay bills on time:
- While 'meeting commitments' scores fell for low-income workers scores for households that relied on income support payments actually improved in the COVID period.
- Unemployed workers who were likely to have access to JobSeeker Payments reported a 10% improvement in ability to meet commitments during the COVID period, as did single parents and disability support pensioners who were not in employment.
- Some financial impacts of the COVID-19 crisis will be long-term.
- Many vulnerable groups in employment reported declines in financial resilience during the COVID period as work hours fell, forcing many to draw down their savings. These included workers in the lowest income quintile and those relying on disability support pensions.
- The proportion of low income women with superannuation declined by 6 percentage points. Single parents not in employment showed an even larger 10 percentage points decline.
The findings suggest that harmful impacts from the crisis were less severe where people had access to government support, as well as their own savings or other resources.
Real, widespread recovery will require not only adequate social security that allows resilience, but also investment in full employment and social infrastructure such as affordable housing.
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.