Rising cost-of-living pressures continue to strain household budgets across Australia. To respond, policymakers require timely and reliable measures of financial hardship. This paper introduces a new high-frequency indicator of financial stress derived from failed direct debit payments in bank transaction data. This high frequency indicator could offer policymakers an early warning indicator of financial stress and inform targeted policy responses.

Findings

• The analysis shows that failed payments have gradually increased since the phase-out of the large-scale income support measures introduced during the COVID-19 pandemic.
• The trend has been particularly pronounced among mortgage holders, coinciding with the Reserve Bank of Australia’s interest rate increases since mid-2022. However, payment failures remain persistently higher among renters.
• Survey data confirms the validity of the indicator, with individuals experiencing payment failures much more likely to report broader financial difficulties.