Sydney, Nov 30: Australian consumers are determined to come out on top of the current economic turbulence, with 69 per cent of Australians remaining ambitious when it comes to achieving their financial goals, such as saving for a holiday, buying a house or paying off debt.
Released today, the Equifax Australian Credit Scorecard 2022 has revealed that Australians are pragmatically tackling economic uncertainty, setting financial goals (89%), implementing budgeting techniques (51 per cent), and spending less on discretionary items than they were 12 months ago (37 per cent).
The Equifax Australian Credit Scorecard offers market-leading insights into the credit habits, behaviors and scores of Australian consumers. It combines Equifax analysis on the credit scores of the Australian banking population with consumer research of 1,016 Australians.
Compared to last year, half (48 per cent) of Australians are now more likely to save each month, with Gen Z (64 per cent) and Millennials (60 percent) saving more than older generations.
James Forbes, General Manager Consumer, Equifax, supports the actions that Gen Z and Millennials are taking to overcome economic curve balls and, as a result, improve their credit scores.
“Gen Z Australians aged 18-24 have a lower average credit score of 665 when compared to the national average of 846. This is likely due to Gen Z not being active in the credit system for as long as older generations.
“While the lower credit score isn’t cause for immediate concern, as they certainly have time to improve their score, it highlights the need for the younger generations to understand how healthy financial habits beyond saving, such as making repayments on time, can build a positive picture of creditworthiness.
“These behaviours will put them in a better position in the future, when their score will play a key role in helping them take out credit for big life milestones, like purchasing a car or a home.”
Despite Australians’ clear interest in improving their financial situation, there are still barriers to achieving financial freedom, with only half (50 per cent) knowing how to access their credit report.
Another 70 per cent of Australians were also found to not be fully aware of all the information included in a credit report. This knowledge gap could hinder consumers’ ability to demonstrate to lenders they are in control of their finances and secure access to credit, and highlights the need for continued financial literacy efforts from institutions like banks and credit providers. Recent interest rate rises also have seven in ten (69 per cent) mortgage holders concerned about not being able to make their repayments or starting to take action about their mortgage and spending habits. In light of this pressure, many are taking immediate action including considering refinancing their mortgage (27 per cent) and making changes to their spending habits (43 per cent).
“Many mortgage holders who bought at the top of the market haven’t had time to pay down their loans or build equity. Depending on how far they have extended themselves, this group is going to be among the first to feel the pinch as interest rates rise,” Forbes said.
“As a result, these consumers are looking for levers they can pull to help alleviate their financial strain. For example, our data shows that refinancing has surged to nearly 38 per cent of all home loans, and we can see a steady increase from April this year as interest rates started to rise and homeowners looked to find a better deal or fix their loan. We expect that trend to continue for some time.”
Exploring Australian credit attitudes
According to Equifax data, female Australians have a higher average credit score than males (858 and 836 respectively). This could be a reflection of different attitudes to finance; a higher proportion of women say they have financial goals (91 per cent) compared to men (88 per cent), while more men (75 per cent compared to 68 per cent women) are using short-term credit and are curious about alternative ways to finance their lifestyle (11 percent men compared to six per cent women).
More promisingly, the Equifax Australian Credit Scorecard 2022 has revealed a clear interest amongst Gen Z and Millennials in protecting their finances, with Millennials more likely than the older generations to say they are more likely to stick to a budget now compared to a year ago (61 per cent Millennials compared to 53 per cent Gen X and 35 per cent Baby Boomers).
Gen Z (64%) and Millennials (60 per cent) are also more likely than those older to claim they save more now than a year ago, while Gen X (40 per cent) and Baby Boomers (55 per cent) are more likely than those younger to say their monthly saving habits remain unchanged.
“The findings of the Equifax Australian Credit Scorecard 2022 highlight how proactive and determined Australians are to realise their financial ambitions in an evolving economy. However, it is important that consumers have access to the correct information, avoid ‘shopping around’ for multiple lines of credit and establish positive credit behaviour early on to create better opportunities to secure credit,” Forbes said.
“Cementing healthy financial habits early can help Australians get into a better credit position, which will in turn allow them to achieve their financial goals. It’s promising to see younger Australians building positive financial behaviours to close the gap with their more established counterparts, which can lead to an improved credit score over time.
“Given the challenging economic environment, it’s more important than ever that consumers know how to navigate the credit system and understand the power of their positive credit behaviours.
“This is why Equifax is dedicated to educating consumers and helping people live their financial best,” Forbes said.
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