Households’ mortgage bills, energy costs and other living expenses have skyrocketed but less than one in five adults have got a pay rise in the last year.
Alarming results from a Finder.com.au national poll showed 82 per cent of Aussies failed to secure a meaningful pay rise by the start of this financial year and many said they actually took a pay cut.
With living costs expected to continue rising, rents due to skyrocket because of recent government reforms and another interest rate hike hanging in the balance, the lack of pay increases has meant most households are going backwards financially, Finder noted.
Among those who did get a pay rise, nearly two thirds said they got an income boost of under 7 per cent of their previous salary.
For most mortgaged homeowners, this amount would easily have been swallowed by this year’s three interest rate hikes, Finder said.
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Luke and Camilla Johns, with daughter Georgie, refinanced their home loan and saved a lot of money – one of the few ways households are clawing back savings. Picture: Jonathan Ng
Finder personal finance specialist Taylor Blackburn said many Aussies were working just as hard as a year ago but finding their pay didn’t stretch as far.
“This year’s pay rise, if they got one, simply hasn’t been enough to keep up with the cost of living,” he said.
“Millions of workers are losing ground as wages fail to keep pace with the rising cost of essentials such as housing … and energy.
“Even if you’ve received the standard annual increase, your purchasing power may have gone backwards if your everyday expenses have risen faster than your salary.”
Mr Blackburn said stagnant wage growth is making it increasingly difficult for Australians to get ahead financially.
Many Australians are paying higher bills with the same salary they had last year.
“When costs creep up, it becomes much harder to build savings, pay down debt or get ahead,” he said, urging Aussies to ask their bosses for a pay rise.
“Prepare your case, highlight your achievements and ask for a salary review.”
Eastern suburbs homeowners Luke Johns and Camilla Dodkins said cost of living encouraged them to refinance their apartment, which Mr Johns estimated delivered them savings of $200 to $300 a month.
“Cost of living is just crazy right now. We have a one year old and trying to save every dollar if we can. It helped out,” Mr John said.
Refinance.com.au broker Aidan Hartley said interest rate hikes were the biggest drain on household finances right now, especially in Sydney, due to the higher levels of debt people took on to buy homes.
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Taylor Blackburn, personal finance specialist at Finder said many people felt like they were going backyards.
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“People’s salaries are very flat, especially if they’ve been in the same job for a few years,” Mr Hartley said, adding that many people were leaning on their homes to account for the lack of a rise in income.
“A common strategy is to refinance to take equity out of the home to pay for other debts like car loans,” he said.
“With interest rates higher, it can make some sense to roll what was, for example, an 18 per cent car loan into a mortgage where the rate is 6 per cent.
“A lot of people are really struggling right now.”
Mr Hartley said refinancing in the current climate of climbing interest rates would suit homeowners who purchased with smaller deposits and recently attained some equity growth.
“These homeowners are well suited to a refinancing deal because the banks often charge higher interest rates for those with smaller deposits. A lower rate is often available if you’re willing to switch.”
– With additional reporting by Kaylee Cranley
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