I want you to imagine the image of an average prosperous Australian adult. They have a job, they have a home, a means of transport, a family, they can afford to go out for a meal, and go on a holiday. There is plenty of fat on their metaphoric bones.
If for some reason the family loses part of their income capability, they have some money in the bank for a rainy day, may have a redundancy payout, or can rely on other family members to obtain work. There are plenty of opportunities to store food in the pantry.
For many Australians, this is a reality, for others an aspiration, and for others an impossibility. However, if you look at the trend data in Australia, that image of the prosperous Australian is starting to waver with many living on the edge in significant debt. They may still be able to live a prosperous life style however, they can’t afford anything to go wrong.
Australian household debt has steadily risen over the past three decades as more of us aim to own homes and continue to rely on products such as car loans and credit cards. In fact, the ratio of household debt to income has almost tripled between 1988 and 2015, going from 64{01332a80e2e652688e18927fa9a6162580960d47bc08263a3993439d666dcd52} to 185{01332a80e2e652688e18927fa9a6162580960d47bc08263a3993439d666dcd52}, according to the AMP. NATSEM Income and Wealth Report released in 2015.
In the quiet recesses of many Australian minds, there is a growing niggle of uncertainty. They are concerned about what is over the horizon. Security of employment is not what it once was and wage growth is stagnating. Yet many people feel they live in a parallel universe. If they look around them everyone else appears to be doing well enough; happy snaps on Facebook and Instagram. The government is espousing unemployment rates remains constant at 5.7{01332a80e2e652688e18927fa9a6162580960d47bc08263a3993439d666dcd52}. People start to believe it may be just them.
However, when Australians were asked how to define their financial situation by the Pew Research Centre, the level of collective concern became evident.
65{01332a80e2e652688e18927fa9a6162580960d47bc08263a3993439d666dcd52} were not or just making enough money to cover expenses.
65 to 94{01332a80e2e652688e18927fa9a6162580960d47bc08263a3993439d666dcd52} were making a little more than this.
Only 6{01332a80e2e652688e18927fa9a6162580960d47bc08263a3993439d666dcd52} had more than enough to cover expenses.
There are many reasons for such economic insecurity. However, at a basic level what stands between most people and destitution is their job.
There has been a rapid change from salaried work to contract and part time work particularly since the GFC. Many people may find it more difficult to maintain fixed costs like car payments and mortgages, particularly if expected incomes become less reliable.
Paul Dale an economist states that:
“A lot of these employees are working part-time because they can’t find full-time work.”
“It’s restraining incomes and keeping wage growth low.”
The number of jobs rose by 13,500 in January, but that was entirely due to growth in part time work, with full-time employment falling by 44,800 jobs.
This change in working hours is fundamentally changing how families financially operate.
It has moved from balancing fixed costs with an expected fixed income
to
Balancing fixed costs with a variable or less reliable income.
Many people may have a job; however, they are unable to get enough hours to provide them with enough income to pay their bills. This is known as underemployment which currently affects about 8 to 9{01332a80e2e652688e18927fa9a6162580960d47bc08263a3993439d666dcd52} of the workforce or 1.1 million Australians.
Australia’s underemployment rate is the highest in the developed world.
The constant search for enough work, contributes to job insecurity and increasing anxiety for those affected. New research released by Acorns reveals that Australians are overwhelmingly facing mental health and substance abuse issues due to financial pressures.
It is unlikely that employment trends are going to reverse back to full time salaried work, particularly as organisations march further into the technological revolution. So, what are the options to ensure the prosperity that Australian’s collectively desire?
Anyone who believes they have the answer to an increasingly complex problem would be a pure genius. However, I think that the mindset of what the prosperous Australian represents must change.
The personal financial model must consider adjusting from investing predominately in fixed costs, like a home and a car, to one that reflects a less reliable income. The future is about flexibility not rigidity. Taking a more flexible approach may relieve financial stress.
A mindset change would be required by many Australians to achieve a lifestyle that matches a less reliable income. Success may not be defined by material possessions, such as a house and all that goes with it; rather an ability to maintain financial and social flexibility.
The prosperous Australian of the future, may not own a car but participate in shared driverless vehicles which is estimated to cost 1/10th of the cost of owning your own car.
The prosperous Australian may not own their own house but live in flexible accommodation which may increase or decrease living space based on income.
The prosperous Australian, relieved from the financial burden of fixed costs may spend time nurturing relationships and teach their children about quality of time not the quantity of possessions.
The prosperous Australian of the future, will need a similar mindset to be shared by the financial institutions. They will also be required to think differently; developing flexible lending systems that help support their customers when incomes are not guaranteed.
Whatever the options, the world of work is changing. Employment is being restructured with the rapid progress in technologies. To adapt many Australians must redefine the image of the prosperous Australian. They must look for the opportunities that life’s challenges present.
