In the shadow of recommendations from the Commission of Audit that the minimum wage be reduced and unemployment benefits be cut (alongside suggestions that the roughly 150 indigenous programs be hacked – or “consolidated” – to around 6 or 7), an interesting report from the Centre for Social Impact (CSI) – commissioned by National Australia Bank (NAB) – has highlighted the large numbers of Australians who are currently unable to access mainstream finance.
How many Australians experience financial exclusion?
The total number of financially excluded people in 2013 was 3,038,451, which is about 17% of the adult population of Australia.
Of these 3 million financially excluded people, the report found that 35% are young people (aged 18-24) and, most surprisingly, more than 40% of them are employed with a steady job.
The definition of “financial exclusion” used for the sake of the report is:
“Financial exclusion exists where individuals lack access to appropriate and affordable financial services and products – the key services and products are a transaction account, general insurance and a moderate amount of credit.”
Then there’s the issue of “financial resilience” which CSI and NAB studied in 2015. Their report defines financial resilence as:
“Financial resilience is the ability to access and draw on internal capabilities and appropriate, acceptable and accessible external resources and supports in times of financial adversity.”
The financial resilience report showed that 2 million Australians experience severe or high financial stress and vulnerability.
As many as 9.7% of Australians reported having an unmet need for insurance; and 20% had no access to credit in the last 12 months, with 12.4% reporting an unmet need for credit.
As we’ve seen during the past few years of natural disasters, both financial exclusion and financial resilience have a huge impact on how an individual, a family, or a community survives and recovers from a time of financial adversity.
The true cost of financial products
Breaking down the costs of basic financial services, it is presumed that, on average, a transaction account costs $85 annually, a low-cost credit card $711 per year, and general insurance (car and home) $943 per year. For 9.2% of the Australian population, this total – $1,739 – would represent more than 15% of their annual income, and thus severely limits the ability to gain access to the sort of mainstream financial services that the majority of us take for granted.
Commenting on the report’s findings, NAB’s group executive for personal banking, Gavin Slater, said, “Those excluded from mainstream credit are often forced to turn to fringe lenders and can find it difficult to manage basic payments, getting caught in a cycle of debt.”
This information, along with fears that the recent credit history report changes will affect low-income Australians and serious concerns that Commission of Audit recommendations could see support for homeless services withdrawn, points to a potentially worrying time for low income earners in the future.
Need help finding a cheaper option?
When it comes to finding cheaper options in terms of financial products, that’s where CANSTAR can come in handy.
Looking for a transaction account with lower fees? Compare transaction accounts on our website before giving up:
Got an insurance quote that’s just too expensive? Compare your options and you may find a cheaper option:
Looking for a low rate, low fee credit card? Look at what’s available on the market:
If you are a financially excluded woman who wants to start your own business, there’s another opportunity that we want you to know about.
In 2016, the Global Sisters network was launched to cater for the 1.5 million Australian women who face financial exclusion. This non-profit organisation has formed partnerships with major Australian brands such as MYER, Deloitte, and Citi in order to support financially excluded women in starting up their own small business. Global Sisters provides business mentoring/coaching, support networks, short education courses in business “know how”, and micro loans to fund the starting of the business.
As of August 2016, 50 women were already involved in the Global Sisters program.