Australian’s are struggling more than ever to keep up with their bill repayments and avoid becoming deeper in debt. David Taylor from ABC News discovered this first-hand when he visited the Australian headquarters of the National Debt Helpline, where calls have increased an average 20% per month from 2016.
It’s incredibly cliched, but in Australia right now, it’s true: the rich are getting richer, and the poor — well, you know the rest.
We’re talking credit card debt, and mortgage repayments. But those bills are becoming harder and harder to meet as the price of gas and electricity rises, and wages continue to grow at a snail’s pace.
It’s actually quite heartbreaking to witness.
Why do I say that?
Well, I recently spent some time at the Australian headquarters of the National Debt Helpline in Sydney’s Surry Hills. It was my second visit in as many months.
Given this is pretty much one of the last places many Australians turn to in a state of financial distress, you can imagine those who call in are not in a good way.
I had only taken a seat next to one of the helpline’s financial counsellors, Greg Russell, for a few seconds before Sarah (not her real name) called in.
Sarah, in her early twenties, is from Blacktown, in Sydney’s south-west. She’s illiterate, unemployed, and very upset because she can’t pay her electricity bill.
She’s not alone. Mr Russell told me there had been a big increase in debt-distressed Australians calling the helpline in recent months unable to pay their utility bills.
Naturally, he explained, rent and mortgage repayments take priority over the utilities bills because, in the order of survival priorities, you first need a roof over your head.
Record call volumes through crisis centre
Generally speaking, though, the National Debt helpline told me the rising cost of living is becoming crippling.
Utility bills, mortgage repayments and credit card debt, are all contributing to household financial stress.
Last year over 150,000 calls were made to the National Debt Helpline. This year, monthly call volumes for the helpline are already 20 per cent higher, compared to 2016. Based on current call volumes, the NDH predicts that there will be over 182,000 calls this year.
Households in debt distress and at the mercy of the banks
Martin North is the principal of financial research firm Digital Finance Analytics.
He crunched the numbers and calculated that, in March, of the 3.1 million mortgaged households, around 22 per cent were in “mild mortgage stress”.
That’s up 1.5 per cent on February, and is directly related to the even the smallest of interest rate increases by some of the big four banks.
That means those households are managing to make their mortgage repayments, but only by cutting back on other expenditure, or putting more on credit cards, and generally hunkering down.
Then there are those Australians under extreme levels of financial stress.
Data from Digital Finance Analytics show 1 per cent of households are in severe stress.
That means they’re behind with their repayments, and are trying to dig their way out by refinancing, selling their property, or seeking help from services like the National Debt Helpline.
Caught in a credit trap as debts pile up
We all face life’s ups and downs. You can’t really avoid that. But when you do find yourself in a bit of a pickle, often the best way out is to seek advice, or help, from someone who can indeed help you.
Unfortunately, the stories coming from the National Debt Helpline suggest that, when the financial chips are down, Australians are clinging to dodgy credit card companies, or payday lenders, that offer a quick fix.
Too often these folks find themselves in a worse position, some weeks later. It’s then that they call the National Debt Helpline.
Financial counsellor Greg Russell also told me that many Australians who are close to bankruptcy will simply take on more and more credit card debt, racking up tens of thousands of dollars until it eventually catches up with them.
But the rich are sitting pretty…
There remains though a small group of Australians who have never been more wealthy.
Recently published data from the Bureau of Statistics shows around $1 trillion worth of bank deposits in financial institutions. In addition to that, investors are taking advantage of the nation’s south-east property boom, which seems unstoppable. The share market ain’t doing too badly either.
So who are these asset-rich, cashed-up Australians?
Digital Finance Analytics principal Martin North explained they tend to be older, more affluent households, and are, would you believe it “completely insulated from anything that might happen” (in terms of a financial crisis).
And at the other end of the scale?
Yes, you guessed it: “Younger families and recent first-time buyers are under the most pressure,” Mr North said.
Useful tips to help pay your bills
So how do you avoid getting into that awful predicament when you realise you can’t pay all your bills?
Digital Finance Analytics and Mortgage Choice both recommend drawing up a household budget.
It doesn’t matter if you’re on your own, or if you’re part of a large household.
Work out what money’s coming in, and how much is going out, and try to get on top of your finances.
At present, it’s estimated that less than half of households actually draw up a budget.
And on the debt front?
Martin North summed it up well I thought. He said just because the bank is willing to give you money, doesn’t mean it’s a good idea.