Finance leaders call for increased financial literacy and warn of ‘significant potential risks’

Senior leaders in Australia’s finance industry have urged caution amid headlines of optimistic growth of the nation’s rebounding economy.

Speaking at Nine’s State of the Nation finance event on Wednesday, Effie Zahos, finance commentator at Nine, acknowledged the rebound of consumer spending, the strength of real estate prices, and low interest rates, but asked delegates at the morning’s panel session: “at what cost?”

Effie Zahos

“For me, it’s a case of where that consumer spending is coming from,” Zahos said. “What we’re seeing now is this confidence in spending – some of us are cashed up, but others are not. And a lot of disruptors are coming through that change the way we’re spending. Are we spending on credit? Or is it actually our cash flow? So much focus is on trying to reduce mortgage repayments, but I think we’re missing the point – the point should be, try to knock back debt. There’s no point consumers securing the cheapest interest rate at the moment – yes, it has a benefit, but are you able to known down that debt?”

“What I’m seeing is people who are spending like there’s no tomorrow, cashed up with their mortgages so high, then finding themselves in a not-so-pleasant position.”

They were sentiments echoed by Joseph Healy, co-founder and co-CEO of Judo Bank. “We’ve got every reason to be really pleased with how the government and Reserve Bank have helped support the economy through the last 12 months, but I think it’d be foolhardy to assume that there’s no risk of medium- or long-term consequences. The amount of debt that sits in the household market is eye-watering, by any global standards. Interest rates are low now, but it would be foolhardy to assume that would be the case over the next four or five years. There’s a potential for some negative surprises down the track … I think there are significant potential risks building up in the system.”

Toby Boon

Zahos also highlighted the need for increased financial literacy, with findings reflected by Tony Boon, Nine’s director of strategy, insights and effectiveness. Pointing to research conducted by Nine’s Crowd.DNA, Boon spoke of a 113% increase in the conversation surrounding financial literacy, largely driven by women, following the COVID-19 crisis. The problem, he suggested, was compounded by a lack of readily available and accessible information, leaving consumers to conduct their own research.

“The audience is hungry for information, but there is a risk that where they land won’t always be a trustworthy source. For brands, there’s never been a better time to connect with audiences about their finances. They’re curious, open-minded, and keen to engage, but a one-size-fits-all approach will not deliver results.

“We need to meet consumers where they are, not where we would like them to be.”

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According to the research, there is an opportunity for brands in the financial planning, investment and superannuation space to develop a conversation with consumers that focuses on building trust and a long-term relationship.

When respondents were asked what areas they most needed help with, consumers nominated growing long-term wealth, retirement/financial planning, and day-to-day management of super as their biggest areas of need.


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