A brief reprieve? Financial wellbeing after the 2020 COVID-19 lockdowns
In the third paper in the Financial Lives in Uncertain Times series, we explore trends in financial wellbeing during the fleeting period of recovery between the lockdowns of 2020 and 2021.
At a glance
Our analysis of Roy Morgan Single Source Survey data showed that during the low-COVID period (October 2020 to March 2021) that followed the 2020 peak of the crisis, there was no ‘snap-back’ for people on the lowest incomes.
As government supports such as the Coronavirus Supplement were gradually withdrawn, many people were plunged (back) into poverty. Workers in affected industries continued to face challenges making ends meet, with employment and work-hours remaining below the pre-COVID level. Many who had drawn upon savings or taken on debt to get through the crisis faced a long rebuilding process to get back to their pre-crisis financial position.
Our paper explores financial wellbeing trends for vulnerable Australians after the 2020 COVID lockdowns, as the economy reopened and government supports were reduced.
We also consider how prepared these groups were for a second crisis, particularly one with more limited government assistance, given the resurgence of COVID-19 in mid-2021.
We use ANZ's Financial Wellbeing Indicator, which draws on multiple questions in the continuous Roy Morgan Single Source survey. The Indicator brings together three dimensions based on Kempson and colleagues’ (2017) model of financial wellbeing. These include the ability to meet everyday commitments, feeling comfortable about one’s financial situation and resilience to financial shocks.
As Australia emerged from the 2020 lockdowns, many experienced a time of optimism and hope. However, the impact on financial wellbeing was far from over, particularly for social security recipients as the Coronavirus Supplement was wound back:
- Unemployed people who were likely to be receiving JobSeeker reported a 19% fall in their Meeting Commitments scores from the high-COVID period (March 2020 to September 2020).
- Meeting Commitments scores for single parents not in employment fell by a substantial 17% in the low-COVID period, leaving their scores around 50% lower than the Australian average.
And there was still no respite for low-income workers struggling to make ends meet:
- Workers in the lowest 40% of households by income continued to face challenges meeting commitments, with scores for this dimension 10% below their pre-COVID level.
- The decline was even larger for workers in the bottom 20% of households by income: their average Meeting Commitments scores were 19% lower than pre-COVID.
These short-term effects are likely to leave long-term scars. Low-income Australians who took on increased debt and drew down on superannuation are likely to face a long rebuilding process, as wages grow slowly and housing costs remain high. The lockdowns of 2021 can be expected to add to these challenges.
As economies again reopen, the report highlights the need for continued government support as people rebuild their financial wellbeing. In the longer term, government needs to protect people from risk by investing in:
- a decent social safety net that protects against shocks
- investment in full employment to provide secure work and wage growth
- social infrastructure to support future growth.
This report is part of the project. The research was made possible by the generous support of ANZ through the ANZ Tony Nicholson Fellowship and the provision under licence of Roy Morgan Single Source Survey data.
Last updated on 27 October 2021
In the second paper in the Financial Lives in Uncertain Times series, we explore the impacts of the COVID-19 crisis and resulting policy responses on financial wellbeing.
Our analysis of Roy Morgan Single Source Survey data showed that financial wellbeing in Australia improved in the two years before the COVID-19 crisis, but not all groups experienced the same improvements.