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Almost half of all Australian households are dangerously exposed to financial shocks despite historically low interest rates, according to new research by ING Direct.
The findings of the ING Direct Household Financial Fitness Test revealed that 49 per cent of households have less than three months of income at their disposal if the main income earner lost their job for any reason.
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Furthermore, 37 per cent of households could survive for one month or less if the main income earner lost their job. This statistic rose to 58 per cent for renters.
The research also revealed that 45 per cent of Australian households would struggle to pay off an unexpected expense of $10,000 within three months, while 38 per cent of households would take six months or more to pay off a $10,000 expense – rising to 55 per cent for renters.
John Arnott, ING Direct’s executive director of customers said the findings highlight the importance of building a pool of savings that can provide a buffer in financial emergencies.
“It’s not always easy, but aiming to set aside small amounts regularly can be the starting point to growing emergency funds and improving financial fitness,” he said.
ING Direct said the findings come after low interest rates push the bank’s Financial Wellbeing Index to its highest level since it began tracking in the first quarter of 2010.
According to the index, 95 per cent of households say they are comfortable with their mortgage, while 87 per cent are comfortable with their ability to pay regular household bills, and 84 per cent are comfortable with household income.
Mr Arnott added that while low mortgage rates are good for households, home buyers need to be mindful that rates can rise.
[Related: More consumers taking advantage of low rates]
