Changing incomes

Due to the economic impact of COVID-19, many Australians have experienced changes to their employment, including job losses, stand downs and reductions in working hours. As a result, many families have had changes in their income. Families in Australia respondents were asked how their income had changed since COVID-19. Those who were living with a spouse or partner were also asked about changes to their partner's income.¹

Just over 30% of respondents reported a reduction in their personal income (either a little or a lot) since the start of the pandemic, with 19% saying their income had reduced a lot (Figure 1). Among those who were living with a partner, one in four said their partner's income had been reduced (either a little or a lot), with 13% saying their partner's income had been reduced a lot.

At a couple level, 55% of partnered respondents said that they and their partner had experienced no reduction in income, 18% had either their or their partner's income reduced a little, and the remaining 26% had their or their partner's income reduced a lot (Figure 2). Overall, 61% of respondents had experienced no reduction in their or their partner's income, 16% said that their or their partner's income reduced a little and the remaining 24% said that their or their partner's income had reduced a lot.

Figure 1: Change in own income and partner's income since COVID-19

Note: Weighted estimates. N = 6,696 respondents, 4,740 partners. At the time of the survey, many people were experiencing uncertainty about their job, work hours and income. This, combined with the introduction of the JobKeeper allowance and the JobSeeker supplement, means that it was not unreasonable for some people to be uncertain about how their, or their partner's, income had changed and respond with 'don't know'.

Figure 2: Change in either own or partner's income since COVID-19

Note: Weighted estimates. N = 6,534 respondents, 4,736 couples.

In households with resident children under the age of 18, 49% had experienced a reduction in income, with 30% experiencing a substantial reduction (income reduced a lot).

While reports of income reductions are more common in households with resident children than households with no resident children, this is likely to be at least partly due to age differences between these household types, with more retirees in single-person and couple-only households, while households with children were likely to include working-age parents.

Actions taken due to the financial impact of COVID-19

Respondents were asked if they, or someone in their household, had taken any action in response to the financial impact of COVID-19. See Figure 3 for the full list of actions. Over 60% of all respondents had taken at least one of these actions.

Among those who reported a large drop in in their own or their partner's income, 89% had taken at least one action, and 50% had taken three or more actions. Even among those who had not experienced a drop in income, 54% reported having taken some action in response to the financial impact of COVID-19.

Figure 3: Actions taken in response to the financial impact of COVID-19

Note: Weighted estimates. N = 6,428. Those who did not report a reduction in their or their partner's income may have had other household members (such as adult children) who were impacted financially.

Cutting down on spending

Overall, the most common action taken as a result of COVID-19 was to cut down on non-essential expenses, with over half of all respondents (53%) and over 80% of those who had a substantial reduction in their own or their partner's income saying they had done this.

Some reported cutting down on essential items such as groceries - 30% of those who had a small reduction in income, and 52% of those who reported a substantial drop in income.

Many reported dipping into money that had been saved for other purposes. Just over a quarter of all respondents and almost half of those who had a large reduction in income said they had done this.

In addition to deferrals on mortgage payments, some banks have announced support packages for their customers that include repayment relief and/or freezing repayments on credit card repayments, personal loans and car loans. Approximately 5% of all respondents said they had applied for a new loan, credit card or increased credit card limit, and 4% had asked for deferred payments or an interest freeze on a credit card or loan. Among those who reported a substantial drop in their or their partner's income, asking for deferred payments or an interest freeze on a credit card, personal loan or car loan was more common (11%) than applying for a loan, new credit card or increased credit card limit (7%).

Getting help with housing costs

Around one in seven (15%) of those who reported a substantial reduction in their or their partner's income had asked for a pause on their rent or mortgage payments.

Among those paying rent, other housing-related actions taken, reported in open-text responses, included negotiating a rent reduction from their landlord or asking to defer a rent increase. For those paying off a mortgage, other actions included refinancing their home loan, reducing mortgage repayments or interest rates, changing repayments to interest only, or making only the minimum repayment.

Early access to super

One in nine respondents (11%) said that they, or another household member, had applied for early access to their superannuation. Among those who had experienced a reduction in their or their partner's income, one in four (26%) said that someone in their household had accessed their superannuation savings early.

Help from family, friends and welfare organisations

Overall, one in 11 respondents (9%) said they had asked for help from friends or family, and one in 12 (8%) said they had asked for help from a welfare or community organisation. Among those who had experienced a large a drop in income, 19% had asked for financial help from friends or family and 12% had sought help from a welfare or community organisation.

Differences in types of financial actions taken

Among respondents who said that they or their partner had experienced a reduction in income (either a little or a lot), the likelihood of taking some of these actions differed by age, and whether or not they had resident children under the age of 18. For example:

• Reports of cutting down on essentials and using savings were less common among those over 40 than among younger people.
• Asking for help from family and friends and welfare organisations was less common among those in households with resident children under 18 - and also less common among respondents over the age of 40.
• Reports of household members applying for early access to superannuation was less common among respondents aged 50-59 than for those in other age groups. This may be because they are approaching the superannuation preservation age where they can access their superannuation savings.
• For other actions, such as asking for a pause on rent or mortgage payments and cutting down on non-essential spending, there were no significant differences according to age or the presence of children in the household.

Actions of older Australians

The financial impact of COVID-19 has created particular challenges for older Australians. For retirees, actions taken were mainly related to changes to pensions and superannuation, including reducing superannuation drawdowns and applying for the Age Pension and concession card.²

Other actions taken

Those who said they had taken other actions, not listed in the survey, in response to the financial impact of COVID-19 were asked to describe the types of actions they had taken. These responses varied depending on whether or not they had experienced a drop in income.

Among those who had experienced a reduction in their or their partner's income, commonly reported actions included:

• applying for JobKeeper or JobSeeker payments
• arranging payment plans for electricity and gas bills
• requesting reductions in school fees
• suspending health insurance payments
• consolidating other debts at a lower interest rate
• delaying or cancelling major purchases such as cars and renovations
• consulting with an accountant, financial planner or their bank.

Among people who had not experienced a drop in income, many reported saving money on child care fees, petrol and eating out. While some reported making changes to their savings and investments, financial actions taken as a result of COVID-19 were commonly aimed at helping their family or their community.

Australians reducing spending

Overall, these results suggest that, in response to the economic impact of COVID-19, Australians are mostly reducing their spending rather than increasing debt. There appears to be a high level of caution with spending, even among those who have not had a reduction in their own or their partner's income.

Concern about family financial situation

When asked about their level of concern about their family's current financial situation, three out of five respondents said they were at least 'a little concerned' (36% said they were a little concerned, 15% somewhat concerned, and 10% were extremely concerned).

Of course, those whose income had been reduced as a result of COVID-19 expressed higher levels of concern than those who had not experienced a reduction in income. Among those who reported that their or their partner's income had been reduced a lot, almost 30% said they were extremely concerned about their family's current financial situation (Figure 4). But even among those who had not experienced a drop in income, around one in six reported being at least somewhat concerned.

Figure 4: Concern about family's current financial situation, by change in income

Notes: Weighted estimates. N = 6,390. 'Income reduced a little' and 'Income reduced a lot' refer to reported change in own or partner's income.

Compared to concerns about their current financial situation, people were more concerned about their future financial situation, with over 70% at least a little concerned (39% a little concerned, 18% somewhat concerned and 15% extremely concerned).

Among respondents who had experienced a large drop in their or their partner's income, one in three reported being extremely concerned about their family's future financial situation (Figure 5). For those who reported that their (or their partner's) income had dropped a little, levels of concern were not as high, with 55% saying they were a little concerned, 18% somewhat concerned and 8% extremely concerned. Even among those who reported no reduction in income, over 60% were at least a little concerned, and around one in four were either somewhat or extremely concerned about their family's future financial situation.

Comments in the survey indicated that concerns about their family's financial situation go beyond concern for themselves and their partner. They included concern about the financial situation of adult children living at home and family members living elsewhere; and ranged from feeling lucky to not have been impacted financially to issues faced by those who have experienced job loss or a drop in income from employment, businesses or investments. There were also comments about the impact on retirement plans and concerns about job security and career prospects (Figure 6).

Figure 5: Concern about family's future financial situation, by change in income

Notes: Weighted estimates. N = 6,369. 'Income reduced a little' and 'Income reduced a lot' refer to reported changes in own or partner's income.

Figure 6: Impacts of COVID-19 on financial wellbeing

Reference

• Hand, K., Baxter, J., Carroll, M., & Budinski, M. (2020). Families in Australia Survey: Life during COVID-19 Report no. 1: Early findings. Melbourne: Australian Institute of Family Studies.

About the survey

Life during COVID-19 was the first survey in the Families in Australia Survey (AIFS' flagship survey series). The first wave ran from May 1 to June 9 2020, when all states were in various stages of lockdown. There were 7,306 respondents. A second survey wave is planned for November 2020.

Contact

For more information, visit the Families in Australia Survey project page or email [email protected].