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Australians feel cost-of-living pressures heading into Christmas

Australians are heading into Christmas under huge financial stress, with more than half of people struggling to make ends meet as the cost of living soars.

Research from Melbourne University has found that 56 per cent of people are struggling or failing to meet financial commitments because of rising interest rates, inflation and the cost of living.

Dr Ana Gamarra Rondinel, a research fellow from the Melbourne Institute of Applied Economic and Social Research, said she has been looking at financial distress data from the start of the COVID-19 pandemic.

“Financial stress, financial insecurity, and financial resilience are the three measures we looked at,” she said.

“Households look more vulnerable than in the years of the pandemic.”

The level of financial stress during the pandemic peaked at 57 per cent of people in 2020.

Disproportionate impact

According to the research, women are more likely to report having eaten less or skipped meals to save money, particularly if they are aged 18 to 44.

Rondinel said single mothers are at a higher risk of reporting food insecurity or financial stress, which factors into the results of the research.

“We observe that bread, cereal products and dairy are the ones that increase the most,” she said.

“These are all products women are more likely to pick off the shelf, especially mothers.”

A recent survey from Finder reaffirmed the research, with 51 per cent of Australians buying less or cancelling their Christmas plans because of the rising cost of living.

Christmas lunch

Many people reported on cutting down on their Christmas plans or gift-giving because of financial stress. Photo: Getty

Worryingly, 8 per cent said they’d be cancelling Christmas completely because of financial stress.

Sarah Megginson, a personal finance expert at Finder, said rising costs will mean fewer gifts are under the tree this year.

“With mortgage repayments now costing thousands of dollars more than they did last year, many households are tightening belts and sacrificing to save,” she said.

“The festive season is notorious for being an expensive time of year, but soaring inflation has made it even harder to manage financially in 2023.”

Unexpected bills

Another worrying trend from Melbourne University’s research was that 9 per cent of people would not be able to cover an unexpected bill of $3000 and a further 5 per cent would have to work extra hours.

And while 8 per cent said they would ask family, friends or the government for help, 9 per cent would borrow from a bank, but 44 per cent of people under the age of 25 said they wouldn’t be able to use savings.

banknotes

Many young Australians would struggle to pay for a $3000 emergency bill. Photo: Getty

Rondinel said people using debt to tackle financial emergencies “must take a lot of care”.

“When using a credit card for instance, we should always try to pay down the entire balance by the due date to avoid incurring interest rates, which are typically charged at high rates,” she said.

“Alternative forms of debt, like interest-free loans, can also be considered, but it’s important they get financial advice from the bank.”

Easing inflation

Australians will be hoping inflation falls in 2024, after two years of steadily rising interest rates and cost of living.

The government’s Mid-Year Economic and Fiscal Outlook for the 2023-24 financial year predicts inflation will be at 3.75 per cent this financial year, before lowering to 2.75 per cent in the latter half of the 2023-24 financial year and beyond.

Data released in November also confirmed that inflation had undershot expected highs, giving Australians an early Christmas present.

If inflation does drop to an acceptable level, Australians can expect relief from interest rate rises that have cut household budgets, and an easing of the steady rise in the cost of items on the Consumer Price Index.

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