Looking for a new job is the first step Aussies may take to cope with higher costs of living in 2023. Pic: Getty Images
Who is looking for a new job? Nine ways Aussies plan to tackle financial stress in 2023
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- Money Transfers Comparison reckons Aussies will take several steps to counter financial stress in 2023
- Top of the list is moving jobs with the rise in annual wage growth not keeping up with soaring inflation
- Aussies may also seek out high interest rate savings accounts with traditional safe haven investments disrupted
Aussies have entered 2023 with financial stress and uncertainty. Paying off a home has become more costly with the RBA raising interest rates nine times since May 2022 bringing the cash rate to 3.35% from 0.10%.
And the central bank hasn’t ruled out more interest rate hikes to tackle inflation which hit a 32-year high of 7.8% over the year to December 2022, seriously impacting household budgets.
Money Transfer Comparison founder Alon Rajic said households and small businesses will make tougher decisions in 2023 to cope with the new financial and economic environment.
Here are Rajic’s nine steps he forecasts Aussie households and small businesses will take to counter financial stress in 2023.
1. Move jobs for better pay or more flexibility
He said the start of 2022 saw the highest annual job mobility rate in the last decade, with more than 1 million Aussies changing employment and 2.1 million either choosing to leave or losing their jobs.
The 3.1% rise in annual wage growth in Australia was outpaced by the increase in inflation by late 2022.
“It should come as no surprise that more than 12% of Australians are opting for jobs that allow more flexible work arrangements or a higher pay,” Rajic said.
He expects this figure to grow in the next 12 months as Aussies take steps to address financial stress.
2. More savings will go into high-interest savings accounts
Rajic said cryptocurrency crashes, share-market volatility, declining property prices, rising interest rates and high inflation have disrupted traditional ideas of safe-haven investments.
He said in this year of uncertainty, more people will increase their savings – and will look for safe, high-return methods to help them.
Research shows 47% of Aussies believe high-interest savings accounts and superannuation will be the best places to put their money and get a return on investment in the coming year.
These two options outranked investment property, shares and crypto.
Just 7% of survey respondents would put their money into precious metals, 18% into investment property, 11% into shares and 3% into cryptocurrency.
3. Switch from traditional banks to non-bank fintech services
Even before the RBA began raising rates, banks were increasing fixed rate loans in anticipation. As a result, Rajic said loan rates are now sitting 4-5% higher than the RBA cash rate.
“More rate rises this year is likely to drive Aussies to seek out smaller non-bank fintech services that offer better deals, including lower exchange rates and fees, than traditional banks,” he said.
4. Mortgage refinancing will grow
With interest rates set to rise again during the first quarter of the year Rajic said roughly 2 million Australians are intending to refinance their current mortgage.
“More homeowners will look for a better deal on their mortgages, as two-thirds of mortgagees will come off fixed rate loans by the end of the year and feel the full impact of the last few months of rate increases,” he said.
“Home owners who refinance will not only seek a better interest rate, they are likely to develop a loan repayment strategy with more flexible and multiple fixed rate and variable loans to reduce their interest further and shorten their loan terms.”
5. Two in three Aussies won’t look at AUD movements
After Covid-19 delayed travel plans Money Transfer Comparison research has shown many Aussies are still willing to put money aside for travel no matter the direction the Australian dollar will go.
If the Australian dollar dips, two-thirds (62%) of Aussies would still travel overseas, two-thirds (63%) would still purchase products overseas, almost three-quarters (71%) would not avoid investing overseas, while 79% would not avoid gifting or donating money overseas.
6. Make passive income from personal assets
More Aussies will look to peer-to-peer services to generate a second and passive income stream by making valued and rarely-used assets available on rental platforms.
For instance, Swimply, dubbed the Airbnb for backyard pools, allows Aussies to rent their pool by the hour.
Similar services have also been created for parking and storage spaces, motor vehicles and various kinds of chattel such as tools and machinery.
7. One in three SMEs will seek financing to get through a tough year
Many small businesses have also been hit hard by inflated costs including supplier goods, wages and petrol.
In fact, 72% of small businesses – who already survived through tough economic periods during the pandemic – have admitted they have been hit by rising expenses.
A report on the top inflated expenses that businesses are challenged with found nearly one-third (31%) are having difficulty paying suppliers and petrol, and 26% are struggling to pay wages.
As a result, many businesses are likely to take out business loans to weather a tough year ahead.
8. Mixing business and personal finances to get through
As the risk of recession and higher interest rates climbs, new research reveals that business directors could borrow from their businesses or personal finances to survive, despite the potential risks to their financial security.
In a potentially tough financial period, more than half (56%) of Aussie SME owners either have, or would, borrow funds from their businesses to solve personal financial issues, while 3 in 4 (72%) would support their businesses using their personal savings or assets.
9. Consolidate debts
Rajic said borrowers will often take out a new personal loan to indemnify their existing debts, resulting in a single loan, and set of repayments, over a set period.
“By refinancing existing debts into a single loan, borrowers are afforded greater control over their finances,” he said.
Rajic said debt consolidation simplifies the repayment process and is the most popular reason for taking out a personal loan in Australia.
“Amid rising interest rates, borrowers should compare the interest rate for the personal loan against your existing ones to ensure that refinancing will be worth your while,” he said.
