understanding financial hardship in 2024: insights from the ABA banking conference

I had the privilege of participating in a panel discussion on financial hardship at the recent Australian Banking Association conference in Melbourne. It was a great panel of experts that included Shayne Elliott (CEO, ANZ), Natasha Toholka (Partner, Norton Rose Fulbright), and Peter Gartlan (CEO, Financial Counselling Australia).

The discussion was enlightening, emphasising the growing divide between the affluent and the struggling in Australian society. This gap affects a broad spectrum of people, including both consumers and small business owners, leading to significant consequences on physical and mental health, personal relationships, and financial security. The ramifications of financial distress are widespread, contributing to rising crime rates, domestic violence, hospital admissions, and bankruptcies. Children are often the most affected, as family life becomes increasingly strained with parents under immense stress, frequently working multiple jobs to make ends meet.

Peter highlighted that number of calls being received by the National Debt Helpline has increased significantly in recent months and hence we discussed a range of topics on the panel that result in financial hardship and explored ways in which vulnerable customers can be given the tools and support to ensure they avoid the financial hardship trap.

Some of the key discussion points included:

• The appropriate language (who says financial hardship other than those in the industry)
• Responsible lending (do the current regulations prevent access to the major banks for vulnerable customers)
• Early identification of vulnerable customers (what tools and technologies can be provided to educate and inform to ensure individuals can manage their finances more effectively)
• What role has AI in the financial hardship discussion.
• Resilience (We are still the lucky country with most Australians able to adapt their lifestyle to accommodate difficult economic conditions)

In summary, we concluded that the financial landscape in 2024 presents significant challenges that require organisations to take further meaningful steps to support customers experiencing financial hardship. It is also crucial for individuals to be resilient by taking personal responsibility for their finances, adapting their behaviours, and utilising the vast array of information and tools available online to become better informed.

I was lucky enough to kick off the panel discussion, presenting some confronting slides about consumer and SME financial hardship.

You can access these slides here, but some of the key stats presented include:

• 26% of consumers rate their financial security as 0-3 out of 10.
• 1 in 3 Australians identify the cost of living as the worst aspect of living in Australia.
• 47% are currently unhappy or indifferent about their lives
• 61% of consumers report rising energy bills as a major concern.
• 58% struggle with the affordability of essential products.
• 38% worry about their ability to make rent or mortgage payments.
• 28% have postponed routine medical check-ups to save money.
• 42% of small businesses have faced significant financial challenges in the last 12 months.
• 4 in 10 businesses are very concerned about rising interest rates.
• 22% of businesses have zero cash reserves
• 46% have reduced their own income to sustain operations.
• 10% do not expect to meet their loan repayments over the next three months.
• 11% of businesses are consulting banks or financial counsellors about financial hardship.

For further details and comprehensive insights, please contact James Organ, Managing Director at Fifth Quadrant (james@fifthquadrant.com.au).