Bill shock, credit cards leading causes of financial distress during COVID - ANGLICARE

One of the largest studies ever conducted of financial counselling clients in Victoria has identified utility bill shock and credit card debt as two of the leading causes of financial distress during COVID-19 in 2020. The research also recommended raising JobSeeker permanently above pre-pandemic levels to give vulnerable people a better quality of life.

The report Financial stress in Victoria during lockdown contains analysis of data from Victorian financial counselling clients over 18 months from April 2019 to September 2020, comparing data from before the pandemic to periods of movement restriction to stop the spread of Coronavirus. Anglicare Victoria is one of the state’s largest providers of financial counselling services.

Anglicare Victoria CEO Paul McDonald said the last year found more people struggling with issues such as family violence and mental health at the same time as their finances. Reports of major life events such as job losses and relationship breakdown also intensified during 2020.

“Financial counsellors provide free advice on a huge range of financial issues for those who are feeling overwhelmed,” Mr McDonald said.

“Almost two thirds of Anglicare Victoria’s financial counselling clients are women. Women are typically the most affected by family violence or relationship breakdowns, as well as facing restricted work opportunities after they have left the workforce to care for children. And many men see asking for help as a sign of failure – particularly if they live in the country. This is a culture that can be hard to change.”

Financial stress in Victoria during lockdown found more than a third (36 per cent) of clients presented with utility debt such as electricity as their most pressing source of financial distress. However, most financial counselling clients experience some level of utility hardship. Household debt such as store credit contracts for appliances (28 per cent) and credit card debt (28 per cent) were the next most commonly-listed debts which caused the most problems for clients.

The report notes that increased government payments to those out of work such as JobSeeker and JobKeeper successfully relieved the acute financial pain experienced by this group, and actually led to a fall in overall financial counselling client numbers during this period. Financial counsellors saw an average of more than 1750 clients per quarter from April 2019 to March 2020, and this dropped to 1332 clients in April-June 2020 and to a low of 1118 in July-September last year.

“Anecdotally we have heard of many new clients who had lost their jobs during COVID and had never had to access government services before. Many of these people appreciated being able to access counselling over the phone or on video conferencing due to the stigma they were feeling associated with this,” Mr McDonald said.

“Put simply, JobSeeker and JobKeeper worked for those affected by COVID-19. They gave people a without work a better quality of life, helping them meet their debts and restore their dignity. They gave people more ability to pay off outstanding debt, and the research recommends that unemployment benefits should be permanently increased to give those at the margins a better chance of getting back on their feet.”

Mr McDonald said those in the city and country felt the effects of the pandemic differently during 2020, with Melbourne residents suffering a second and more limiting period of movement restrictions to halt the spread of coronavirus.

“One of the biggest trends was the rise in clients who experienced multiple issues such as family violence, mental illness or substance abuse at the same time as they were having trouble meeting their bills. In metropolitan Melbourne, less than a third (30.8 per cent) experienced more than one of these issues before the pandemic started. By the third quarter of 2020 this figure had risen to move than half (50.9 per cent).

“The movement restrictions introduced to combat COVID-19 were challenging for everyone, but they also helped to make Australia the envy of the world with our extremely low infection rates today,” he said.

The headline trends from the report are as follows:

• Reduction in client numbers. Client numbers during the COVID-19 lockdown periods declined due to the Federal Government’s increased support payments to help those affected by the pandemic. Contact hours for financial counsellors increased for a range of reasons.
• Utilities were the leading pain point. More than a third (36 per cent) of clients listed utilities such as electricity and water as a leading source of financial difficulty during the July-September quarter of 2020 – but utility debt was an issue for most clients at some level.
• Credit cards and household debt also caused difficulty. 28 per cent of people reported difficulties with their credit cards, and 28 per cent also reported problems with household debt (generally relating to rent-to-own or in-store credit for products like white goods and furniture).
• More clients reported multiple vulnerabilities during lockdown. 44 per cent of those surveyed reported multiple vulnerabilities at the same time as their financial difficulties during July – September 2020, such as family violence, mental illness or substance abuse. This rose sharply in metro areas, from 30.8 per cent before the pandemic to 50.9 per cent in the third quarter of 2020.
• Life events were a major contributor to financial difficulties. Metro areas saw an increase in clients reporting the experience of major life events such as job loss, health issues and relationship breakdowns triggering financial distress during the COVID months. This figure increased from 67 per cent in the year prior to April 2020 to 76.4 per cent in the July to September quarter of 2020.

Financial stress in Victoria during lockdown can be downloaded from the Anglicare Victoria website.

For an interview or photo opportunity with Anglicare Victoria CEO Paul McDonald, please contact Sarah Baird, Anglicare Victoria Senior Media Advisor on 0419 035 117 or sarah.baird@anglicarevic.org.au