March 2021

RESPONSE TO COVID-19

REPORT TO HOUSE OF
REPRESENTATIVES STANDING
COMMITTEE ON ECONOMICS

PublicAUSTRALIA HOME LOAN DEFERRALSAs of 31 January 2021
DEFERRAL ROLL-OFFS
ANZ has over 1m home loan accounts, of which~96k loans received a loan repayment deferral~81k of these home loans have rolled off deferrals
at 31 January 20211

98% hadreturned to
repayment

Of the ~81k
loans that haverolled off
deferrals:1

1% hadrestructured

Of the ~15k that remained on active
deferral at 31 January 2021:2••~30% were original 6 month deferrals~70% were 4 month extensions•~40% were scheduled to roll off in
February•~40% had a buffer3 of >3 months•

69% were owner occupier, higher thanportfolio average

1% hadtransferred tohardshipOur home loan repayment deferral period ended on 31 March 2021. Our COVID-19 support packages are nolonger available to new applicants. If customers are experiencing ongoing financial difficulties, we will continue
to work with them to understand their circumstances and try to help where we can.
Refer to last page for footnotes.

AUSTRALIA SME & COMMERCIAL
LOAN DEFERRALSAs of 31 January 2021

DEFERRAL ROLL-OFFS
ANZ has >236k commercial lending accounts, ofwhich ~23.8k loans received a business loan deferral~21k of these loans have rolled off deferrals at 31
January 20211

90% hadreturned to
repayment

Of the ~$9b4
loans (~21k
accounts) thathave rolled off
deferrals:5

6% hadrestructured,largely tointerest only

Of the $1b that remained on active
deferral at 31 January 2021:2••~10% were original 6 month deferrals~90% were 4 month extensions•~75% were scheduled to roll off in
February, driven by 90% of deferralapplications received in March/April 2020•

Accommodation, cafes andrestaurants were the largest industry on
deferral~15% opted for 4 month extension (vs~8% across the deferral population)••

4% hadtransferred tohardship~30% of active deferrals were associatedwith customers receiving JobKeeper
payments from the government

Our commercial loan repayment deferral period ended on 31 March 2021. Our COVID-19 support packages are
no longer available to new applicants. If customers are experiencing ongoing financial difficulties, we willcontinue to work with them to understand their circumstances and try to help where we can.
Refer to last page for footnotes.

ADDITIONAL SUPPORT FOR AUSTRALIA
SME & COMMERCIAL CUSTOMERS~5.1k loans
worth $550m
have been
written under
the Coronavirus
SME Guarantee
Scheme6

Offering
AustralianGovernment SME
Guarantee andRecovery Loan
Schemes~6.3k accounts
still benefitingfrom temporary
overdraftincreases worth$674m4~2k loans worth~$65m were
written to assist
with providing
JobKeeper4

Offering
AustralianGovernment
Show Starter
Loan Scheme~23.8k accounts
have benefitted
from businessloan deferrals on
loans of $9.5b5

Refer to last page for footnotes.

SUPPORT FOR INSTITUTIONAL CUSTOMERSIn the early days of thepandemic we moved
quickly – in the six
months to end-March
2020 we provided $16
billion7 in additional
lending globally
Lending volumes
declined in the second
half as global capital
market conditions
improved, enablingcustomers to access debt
and equity markets andrepay bank debt

We supported hundredsof customers working
from home by providing
secure remote access via
web and mobile, andhelped reduce customer
net losses from fraud
by 62%

Through the pandemic,
our digital channels
came to the fore, andpayment volumes
increased 9.4%
year on year

We helped arrange thelargest social bond by
an Australian issuer for
the National Housing
Finance and Investment
Corporation, as well as$72 billion in funding
for the AustralianGovernment’s COVID-19
support package
Refer to last page for footnotes.

ADDITIONAL RESPONSES TO COVID-19
COMMUNITY RESPONSE
ANZ has worked with ourcommunity partners
throughout the COVID-19
pandemic.

$1.5 million to community
partners to support Australia’s
most vulnerable

Since March 2020
together with our employees,
we have donated over
$2 million to the community
through workplace giving
Financial inclusion programs
have been adapted to bedelivered online, reaching over
46,000 Australians in FY20

Funding the Brotherhood of St
Laurence to research COVID-19
impacts on vulnerable
populations

CORPORATE RESPONSE
ANZ is taking action to ensure the wellbeing of ouremployees and customers during the COVID-19
pandemic.

Staff are returning tothe office in line with
COVID-19 workplacerequirements

CovidSafe plans forour branches andbuildings, visiting
customers, domestic
travel, meetings,
events & recruitment

Physical distancing in
offices: every second
desk not in use,
meetings via videoconferencing &limiting people inelevators

A range of wellbeing
resources including:a wellbeing app;programs to support
mental & financial
wellbeing; andreimbursement ofequipment for home
workspaces

Protecting our
employees andcustomers in ourbranches

Perspex screens,enhanced cleaning,
hand sanitiser &masks available

NOTES
1. As at 31 January 2021. Prior to 8 October 2020, COVID-19 loan deferrals were available to customers if either their
Home Loan repayments were less than 30 days past due, or if their repayments were less than 90 days past due andthey were up to date at 1 March 2020. From 8 October 2020, loan deferrals have been available to customers thatare less than 90 days past due. Figures exclude a population of home loan deferrals where the loan is being
managed by Private Bank, at 30 November this population is 45 loans.
2. Active Deferral numbers exclude accounts due to expire / exit where customers have already confirmed they will
recommence repayment.
3. Buffers are calculated at customer level, incorporating all retail debts within the customer cluster at ANZ, and allfunds available in ANZ redraw, offset and transaction and savings accounts.
4. Number of accounts as at 16 March, EAD as at 31 January 2021.
5. As at 31 January 2021.
6. As at 26 February 2021.
7. Institutional Gross Loans and Advances excluding FX and Markets.

24 March 2021

Housing: powering ahead
Felicity Emmett | Senior Economist
Felicity.Emmett@anz.com

Adelaide Timbrell | Economist
Adelaide.Timbrell@anz.com

Follow us on Twitter@ANZ_ResearchThis is not personal advice. It does not consider your objectives
or circumstances. Please refer to the Important Notice.

Housing
strengthens
on lowback
mortgagerates and a stellar economicThehousing
market: coming
to earth
recovery•

The housing sector is recovering strongly. National house prices have recovered their (modest) COVID-19
losses and are now rising strongly. Ultra-low interest rates are supporting the housing market. The impact of
low rates has more than offset the headwinds from elevated unemployment and very low population growth.
We expect house prices at the national level to rise a sharp 17% across the capital cities in 2021. Pages 3-15•

The combination of strong demand and low supply is pushing prices sharply higher. Housing finance has risen
76% since the low in May, investors are returning to the market, auction clearance rates are running close to80%, and households are reporting expectations of significant price rises. While new listings are picking up,
they have not keep pace with sales, leaving stock levels very low.

•

Performance across geographies and segments has been mixed over the past year, but price gains are now
converging. Regional prices led the charge, but capital city prices are now outperforming. The unit market
remains softer than the house market. Although rents are now in positive territory at the national level, theyremain weak in the Sydney and Melbourne apartment markets, where vacancy rates are still high.

•Housing construction is rebounding sharply, helped by the federal HomeBuilder scheme, other government
support and low interest rates. Housing finance for the construction of new homes rose just under 160%
between June and January this year. Building approvals rose more than 50% between June and December,before pulling back in January as the HomeBuilder grant halved. There is now a substantial pipeline of activity
for 2021, and we expect double-digit growth in housing construction in 2021. Pages 16-24•

Government stimulus, superannuation withdrawals and mortgage repayment deferrals have lowered the riskof financial stress by providing temporary assistance to some borrowers. While many borrowers have returned
to repayments, there remains a small number of borrowers still on deferral. Lender forbearance is expected tolimit the incidence of household financial stress, but we expect a modest rise in arrears over 2021.
Pages 30-34•

We expect strongly rising house prices and a likely easing in lending standards to see the Australian Prudential
Regulation Authority (APRA) step in with macroprudential controls later this year, which will see house pricegrowth slow in 2022.

Please click on the ANZ logo to return to this slide at any stage.

2

PricesHouse prices accelerating• Prices rose a rapid 1.9% m/m in February, accelerating sharply from the 0.5–
0.6% gains over the previous three months. Strength was evident across all
capital cities, with Hobart (+2.4%) and Sydney (+2.3%) the strongest andAdelaide (+0.8%) and Darwin (+0.9%) making the smallest gains. Daily house
price data suggest the gains in March will be even stronger. Prices are now above
levels seen in February 2020 (before the real onset of the pandemic) in all capitalcities bar Melbourne where prices are down 1.5% y/y.

• Owner-occupiers are driving the market with new housing loans up 80% since theWe expect house prices
at the national level torise a very strong 17%
through 2021, before
slowing to 6% in 2022
as macroprudential
policies bite.

low in May. Buyers are taking advantage of historically low interest rates,
particularly fixed rates, as well as various government support programs. First
home buyers are also benefitting from government support in the form of firsthome owner grants and reduced stamp duty. Investor activity is also growing
strongly (+62% from the low in May), but given earlier weakness its share of total
new finance remains low at 16% compared to an average of 25% over theprevious decade.

• The strength in sentiment is putting upward pressure on prices, with low stocklevels adding to the fear of missing out (FOMO) sentiment emerging in themarket.

• We now expect price gains of around 17% across the capital cities (up from 9%
previously) in 2021. With interest rates the primary driver of price gains, we see
strength across all capital city markets.

• The first half of 2021 is likely to be stronger than the second half. By June we
expect prices to be rising at a more moderate pace given the end of government
programs like JobKeeper and HomeBuilder, and a lift in fixed mortgage rates. By
year end though, we expect the regulators will step in with macroprudential
controls to address the overheating market, with the exact measures likely to be
dependent on how the market develops over the next six months or so.

4

Falling housing interest rates are driving the market
Variable rates

Fixed rates****Owner-occupiers; three-year term to maturity

Source: RBA

5

Low interest rates are fuelling strong house prices gains globally
New ZealandUnited States

United Kingdom

South Korea

Source: SPDJI, Nationwide, REINZ, KOSTAT, Macrobond, ANZ Research6Fixed rates have been a key driver, but are likely to rise in H2 2021
Fixed rates still well below variable rates•

Low mortgage rates are a key driver of the strength in
the market, with fixed mortgage rates falling at morethan double the rate of variable mortgages over the
past year or so. Home buyers are taking advantage ofthese lower rates, flocking into fixed mortgages.

•

The average cost of new mortgages is still falling. And
with two of the big four Australian banks now offering
two-year fixed rate home loans below 2%, competitionis pushing rates even lower.

•

But we are likely to be close to the bottom in fixed
rates. With the Term Funding Facility (TFF) ending in
June, and the likelihood that the RBA chooses not toroll the Yield Curve Control (YCC) target into the Nov24 ACGB, fixed mortgage rates are likely to movehigher in the second half of 2021.

•

Further out, there will be more significant increases ininterest costs. Over the past six months, more than
30% of new loans have been at fixed rates. While we
don’t have data on the tenor of these loans, it’s safe toassume that a large proportion will begin rolling off
from May 2023. By then, fixed rates are likely to besignificantly higher and variable rates will also likely behigher given higher funding costs for the banks.

•

So, even without a lift in the cash rate, the housing
market will face higher rates as early as H2 2021, witha more significant tightening in 2023.

Borrowers have switched to fixed-rate loans
40
35

Share of total (%)

30
25

20
15
10
5
0
92

96

00

04

08

12

16

20

Fixed rate home loans** seasonally adjusted loan approvals to Sep 2019; thereafter loans funded in the month (not seasonally adjusted)

Please click on the ANZ logo to return to this slide at any stage.

Source: RBA, ABS, Macrobond, ANZ Research7

Housing price growth is converging across cities, but large
divergences remain
House price performance has varied

Melbourne and Sydney have been the weakest
markets but are catching up

Prices at the high end are sharply picking up

Performance across cities andsegments has been mixed

Source: CoreLogic, Macrobond, ANZ Research8Both household and business sentiment towards housing hasturned around sharply
House price expectations continue to rise…

…but affordability constraints are biting,with “time to buy a dwelling” down

Property industry participants
now expect house prices to rise…

…with the most positive
expectations in WA

60

5

100

4

80

3
2

20

1

0

0
-1

-20

% change q/q

Net balance

40

-2
-40

-3

-60

-4
11

12

13

14

15

16

17

Property Council-ANZ house price outlook (lhs)

18

19

20

21

Year ahead expectations for housing prices(net balance)

80

60
40
20
0
-20
-40
-60
-80
NSW
Sep-19VIC
Dec-19QLD
Mar-20SA
Jun-20WA
Sep-20AUS
Dec-20Australian Dwelling Prices (rhs)

Source: ABS, ANZ-PCA, CoreLogic, Macrobond, Westpac-Melbourne Institute, ANZ Research

9Housing finance: no flattening of this curve yet!
Housing finance has picked up sharply,
especially for owner-occupiers

Refinancing is down fromthe peak, but remains highThe investor share of finance remains very low

First-home buyer finance has surged

Source: ABS, APRA, Macrobond, ANZ Research

10Auction indicators have rebounded and volumes are picking up, but
the level of stock on the market remains very low
Auction clearance rates have picked up
and are signalling solid price gains

Auction volumes are recovering
8,000
7,000
6,000

No. of auctions

5,000
4,000
3,000
2,000
1,000
0
15

16

17

18

Sydney19

20

21

Melbourne…but high demand is absorbing new properties
and total stock on the market remains low

Listings are recovering…
25,000100,000
90,00080,000
Number of total listings

Number of new weekly listings

20,00015,00010,0005,000

70,00060,00050,00040,00030,00020,00010,000

0

0

Jan

Feb

Mar

Apr

May

2018

Source: CoreLogic, ANZ Research

Jun

Jul

2019

2020

Aug
2021

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

2018

Jun

Jul

2019

2020

Aug

Sep

Oct

Nov

Dec

2021

11

We expect sharp gains in house prices in 2021
Housing price forecasts, by capital city

We now expect a 17%
rise in house prices on
average across thecapital cities in 2021.
Perth and Sydney look
set to be the best
performers (+19%),with Hobart (+18%)
close behind.
Melbourne, Brisbane(+16%) and Adelaide(+13%) are all set to
enjoy strong gains.

Housing prices, y/y % change (calendar year)

20
16
12

8
4
0
-4
-8

-12
Australia* Sydney Melbourne Brisbane Adelaide
2018

2019

2020

Perth

2021 (forecast)

HobartDarwinCanberra

2022 (forecast)* Capital city weighted average

Source: CoreLogic, ANZ Research

12Rental markets have strengthened but the market remains
challenged by weak fundamentals
Rents have risen, with houses leading the way• After falling sharply in the initial months of thepandemic, advertised rents are rising strongly,
with all capital cities recording gains in February.
The strong economic recovery is likely to bolster
the rental market, although headwinds remain.

• While overall rents have ticked higher, this masks

Unit rents are weighed down by
weakness in Melbourne and Sydneyvery disparate performances across markets.
Sydney and Melbourne rents are still being
weighed down by weakness in the unit market.
This is gradually abating, although fundamentals
remain soft. Residential vacancy rates are highest
in the two largest capital cities, which have been
hit much harder by the lack of overseas migration(where new migrants tend to rent rather than buy
when they first arrive). These markets are alsoseeing supply in the form of new apartmentcompletions increase at a time of reduced demand.

• More broadly, the rental market is facing
headwinds from the lagging employment recovery
for younger people (who are more likely to rent).

Source: CoreLogic, Macrobond, ANZ Research

13

The rental market has improved, but headwinds remain
Rents have turned around

Apartment completions*

Vacancy rates have risen sharply in Melbourne,
but are much lower in PerthThe lagging recovery in youth employment
is a headwind for the rental market
Cumulative change in employment
since Mar-20, %, sa

5* Quarterly, share of 2016 non-detached housing stock
Source: CoreLogic, Macrobond, SQM, ANZ Research

0

-5

-10

-15

-20
Mar-20May-20

Total

15-24

Jul-2025-34

Sep-20Nov-2035-44

Jan-21
45-54

Mar-2155+

14

Very weak population growth is constraining housing demand
Population growth is falling sharply…

…as immigration collapses…

NSW and Victoria have borne the bruntof the drop in overseas migration

Natural increase is also slowing

Net overseas migration

100,000

80,00060,00040,00020,000

180

180

160

160

140

140

120

120

100

100

80

80

60

60

40

40

20

20

0

0
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20
NSW
Victoria
Queensland
SA
WA
Tasmania

Source: ABS, Macrobond, ANZ Research

Natural increase, rolling annual sum, '000s

Natural increase, rolling annual sum, '000s

120,000

0
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20
NSW

VIC

QLD

SA

WA

TAS

Australia

15Construction activity

Residential construction to grow strongly in 2021
• Housing construction is rebounding sharply, helped by the federal HomeBuilder
scheme, other government support as well as low interest rates. Finance for theconstruction of new homes rose nearly 160% between June and January thisyear, while building approvals rose more than 50% between June and December,before pulling back in January as the HomeBuilder grant halved. We are likely to
see a pick-up through February and March before the grant finishes at the end of
this quarter.

• Within approvals, there has been a change in home buyer preferences towards
larger, detached dwellings, with less focus on proximity to the city. This is a likely
a result of the increase in home-based working following pandemic lockdown
conditions, as well as a heightened appreciation for more space at home. In theyear to January, total approvals outside capital cities were up 41% y/y while
approvals in capital cities were only up 11%. House approvals were up 40% y/y,while unit approvals were down 21%.

• This recovery in approvals provides a substantial pipeline of activity for 2021 andwe expect housing construction to grow a solid 12% in 2021, with strength
concentrated in detached house building and renovations. Bringing forward
construction will inevitably create a shortfall of activity once the stimulus iswithdrawn, so activity is likely to decline next year.

• The decline in activity in 2022 is likely to be modest, however, given ongoing low
interest rates, as well as remaining government supports, including first homeowner grants by state governments and the first home buyer deposit scheme.

• While home-based working trends and the lack of overseas migration may
dampen unit approvals for a time, the faster-than-expected recovery in economic
activity and the labour market looks to be bringing more investors back to themarket.

17

Housing approvals have picked up strongly
Residential approvals rose strongly through 2020

Building approvals,
particularly houseapprovals, have risen
strongly over recent
months.
Building approvals rose
more than 50%
between June andDecember, before
pulling back in January
as the HomeBuilder
grant halved.

Source: ABS, Macrobond, ANZ Research

18

Approvals in all states have picked up solidly
House approvals are picking up everywhere

Approvals have picked
up strongly across allstates, but Western
Australia has
experienced thebiggest rise, helped byadditional state
government support.

Unit approvals have been much more subdued

Source: ABS, Macrobond, ANZ Research

19Key housing support policies are rolling off this year
Key supports that will not continue into 2021-22, including the $12,500 (reduced from $25,000 since 1 January)
Homebuilder grant for new builds and renovations (ends in March), the 50% stamp duty concession in Victoria(ends in June) and the Western Australia building bonus of $20,000 (ended in Dec 2020).

Total potential grant value,
first home owners

Housing grants 2020

Housing grants 2021-22

60,00060,00050,00050,00040,00040,00030,00030,00020,00020,00010,00010,000
0

0
NSW

VIC

QLD

SA

WA

TAS

NT

ACT

Building bonusFirst home owner grant (extra for regional)First home owner grantFederal homebuilder

NSW

VIC

QLD

SA

WA

TAS

NT

ACT

First home owner grant

Other government housing supports 2020-21

Government housing supports 2021-22• First home super saver scheme• First home loan deposit scheme, 11,800 places
total (inc 1,800 rolled over from 2019-20)• Victorian 50% concession on stamp duty forproperties under $1m (ending 30 June 2021).
• Various first home buyer stamp duty concessions
across the states• First home super saver scheme• First home loan deposit scheme, 10,000 places• State-based first home buyer stamp duty
concessions likely to continue

Source: State Revenue Offices, Commonwealth Treasury, ANZ Research

20

Strength in housing finance and a recovery in building approvals
point to a substantial pipeline of construction
Housing finance points tomore strength in approvals

Unit approvals remain depressed

Developer finance looks to be flattening out

Renovation approvals have spiked

Source: ABS, Macrobond, ANZ Research

21

COVID-19 has changed home-buyer preferences
Survey of home-buyer preferences

Of the 44% of builders who noticed a change in home buying preferences:

Preference for working from home spaces
such as home offices or study nooks

Structural trends
coming out of thepandemic, including
increased workingfrom-home, willchange the pricetrajectory of certain
areas and dwellingtypes.

Preference for additional living spaces

Stronger preference for suburban living

Regional Living

Stronger preference for inner-city living

0%

Source: HIA Economics

10%

20%

30%

40%

50%

22

Regional building approvals have increased as
more people moved out of cities
12,000Quarterly net migration to the regions from
capital cities, no of people

9,000

6,000

3,000

0
10

11

12

13

14

15

16

17

18

19

20

Net migration from capital cities to regions

Quarterly approvals outside capital cities are at a decade high
21,0007,000

18,0006,000

15,0005,000

12,000

4,000

9,000

3,000

6,000

2,000

3,000

1,000

0

Quarterly approvals, regional areas

Capital city approvals
are also growing, but
are modest comparedto the construction
boom of the 2010s.

Net migration out of capital cities has risen strongly since COVID

Quarterly approvals, capital cities

HomeBuilder and astrong rise inmigration to theregions have driven a
sharp increase inregional approvals.

0
01

02

03

04

05

06

07

08

09

10

11

Capital cities (LHS)

Source: ABS, ANZ Research

12

13

14

15

16

17

18

19

20

21

Regional (RHS)

23

Housing construction set to grow in 2021
Housing construction forecasts

We expect growth inhousing constructionof close to 12% thisyear, before activity
brought forward bygovernment incentives
dries up. Low interest
rates will keep a floor
under activity in 2021.

Source: ABS, Macrobond, ANZ Research24

Affordability

Affordability: policy supports unlikely to keep
pace with price gains over the medium term
Policy support has led to a surge in first home purchases
Homebuilder, the first home loan deposit scheme and various state-based
first home buyer supports have led to much stronger first home buyer
lending over 2020, with annual growth of 73% to January 2021.
Low interest rates are raising borrowing capacity…and prices
While low interest rates have added to borrowing capacity across all
homebuyers, they have also put upward pressure on home prices, whichgrew by 1.9% in February alone. Strong price gains will lock some aspiring
homeowners out of the market. Deposit affordability remains a key
element of housing affordability.
New homeowners taking on near-peak debt
First home buyers entering the market in 2021 are taking on almost-peaklevels of debt. The average first home buyer took on a $429,950 homeloan in January 2021, around $1,000 less than the peak in 2019. The
average first home buyer loan approximately doubled between March 2004
and February 2021.
The post-COVID jobs recovery has been skewed to older workers
More people under 35 lost work during the COVID downturn and, as at
February, there were fewer employed people under the age of 35
compared to before the pandemic. In contrast, there were more people
over the age of 35 working compared to before the pandemic. The higher
likelihood of unemployment for younger workers will slow their progresson saving for a home deposit.

Millennials already have lower home ownership
Millennial cohorts have much lower home ownership rates adjusted for age
compared with previous generations. In 2016, only 37% of those aged 2529 were home-owners. This compares with 41-45% between 2001-2011
and over 50% in the late 20th century. With policy support unlikely to fully
offset price gains, it is unlikely we’ll see a reversal of this trend anytime
soon.
26

First home owners are taking on more debt
Average new loan size
700,000

Average new home loan size, $The average newloan for a first homebuyer is now nearly$430,000, fractionallybelow the peak in
2019. It has
approximately
doubled since 2004.

600,000
500,000
400,000
300,000
200,000
100,000

0
03

05

07

09

First home buyer

Source: ABS, ANZ Research

11

13

15

17

19

21

Upgrader ex refinance

27

COVID-19 employment impacts will weigh onhome ownership rates of younger people
Youth employment is lagging the broader recovery
Cumulative change in employment
since Mar-20, %, sa

Between the strong
lift in housing prices
over the last ten
years and theover-representation ofyounger people wholost work through the
COVID downturn,home ownership rates
among younger
people are likely tocontinue to fall. This is
despite strong growthin first home lending(73% y/y to January)

5

0

-5

-10

-15

-20
Mar-20May-20Total

Jul-20
15-24

Sep-2025-34

Nov-2035-44

Jan-21

45-54

Mar-21

55+

Younger people are less likely to be homeowners
90% of cohort who are homeowners

Home ownership rates
by age have fallen
particularly for older“millennials” including
those born 1982-86
and 1987-91.

Born 1947-51

80

Born 1952-56
Born 1957-61

70

Born 1962-66

60

Born 1967-71

Born 1972-76

50

Born 1977-81

In 2016, only 37.4% of those born 1987-91 were
homeowners

40

Born 1982-86

Born 1987-91

30
25-29

30-34

35-39

Source: ABS, AIHW, ANZ Research

40-44

45-49

50.54

55-59

60-64

65-69
28

The share of renters may continue to increase as
housing prices rise
% of households by housing tenure45% of households by housing tenure

40
35
30
25
20
15
10
5
0
94

96

98

00

02

04

06

08

10

12

14

Owner with a mortgage

Owner without a mortgage

Renter (private landlord)

Renter (public housing)

Source: ABS, ANZ Research

16

18

29

Financial stability

Financial stability: 2021 has less of everything –fiscal support, unemployment, interest costs
Government household support and mortgage deferrals are rolling off
The bulk of special COVID-19 household support (through superannuation
withdrawals, JobKeeper and mortgage deferrals) is at or close to expiry, leaving
households that are still in difficulty at risk. We expect that housing arrears willrise modestly over 2021 as the last of the deferrals roll off.
The remainder of deferred loans are higher risk
As at January, less than 2% of the value of total mortgages in Australia weredeferred. Of the remaining borrowers with deferred mortgages, a smaller share
were voluntarily paying part or full payments in January. These borrowers arelikely at higher risk of moving to forbearance measures or into arrears thanprevious mortgage deferral recipients.
The strong labour market recovery will help
The unemployment rate has been falling faster than expected, dropping from apeak of 7.5% to just 5.8% in February. The strong improvement in the labour
market has reduced the risk of mortgage arrears for many households.
Household finances are supported by very low rates.
Interest payments relative to household income are much lower than they havebeen in recent years. Housing interest payments as a share of household income
are at a 20-year low and total interest payments on household debt are at a 35year low.

House prices and rising debt point to macroprudential tightening by year
end
We expect macroprudential restrictions will be introduced later this year. Signs ofeasing lending standards will be the trigger for the regulator rather than theextent of house price gains. A soft touch approach from the regulator is likely inthe first instance, followed by harder limits, most likely targeted at high debt-toincome loans.
31Interest payments have fallen as a share ofhousehold income
Interest payments as a share of household income

Housing interest
payments are at a
20-year low relative
to household income,while total householdinterest payments
are at a 35-year low.

Source: RBA, Macrobond, ANZ Research

32Mortgage deferrals are winding down at the same time as otherincome supports
Mortgage deferrals are less than 2%of loans everywhere but Victoria

Superannuation benefit payments

Reliance on JobKeeper shrunk in Q4
35% of workforce subsidised by
JobKeeper

Quarterly benefit payments ($bn)

The bulk of deferred housing
loans have rolled off

30
25
20
15
10
5

0
VIC

NSW

QLD

Sep qtr 2020

Source: Commonwealth Treasury, APRA, ANZ Research

TAS

SA

WA

ACT

NT

Dec qtr 2020

33

The end of deferrals still carries some risk
Investor and high LVR loans areover-represented in deferrals

Fewer deferred loans but of the remainder,a smaller % are making payments

High debt-to-income loans are on the rise

Total household debt is lower, but owneroccupier debt is at a new peak200

% of household income

180
160
140
120
100
80
60
40
20
0
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20
Total household debt

Source: APRA, RBA, Macrobond, ANZ Research

Housing debt

Owner occupier debt

34

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THE ANZ ROY MORGAN
FINANCIAL WE LLBEING
INDICATORQUARTE RLY UPDATEMARCH 2021

FINANCIAL WELLBEING OVERVIEW
Trends in financial wellbeing have provided key insights into how
the pandemic has impacted peoples lives and livelihoods in Australia.

The ANZ Roy Morgan Financial Wellbeing Indicator has been reported as a 12-month rolling average every quarter prior to
the start of the pandemic. However, as the 12-month rolling average to December 2020 incorporates 3 months of data pre
COVID-19, it takes into account the financial wellbeing gains made throughout early 2020. To best understand the changes
in financial wellbeing arising from the pandemic, this update focuses on comparing the pre COVID-19 12 months to March
2020 with the combined spot monthly results for April 2020 through to December 2020 to provide a post COVID-19 view.
Individual spot monthly results are also reported to highlight any early signs of change.

INDICATORThe ANZ Roy Morgan Financial Wellbeing Indicator shows that as a result of COVID-19, the financial wellbeing of Australians
DECLINED

FROM

5.9% 60.7

TO(as a score out of 100) in the
12 months to March 2020

57.1

in the 9 months to December 2020
(Figure 1 and Table 1).

QUARTERLY UPDATE: MARCH 2021

INDICATOR (CONTINUED)
From April 2020 to November 2020, the spot monthly financial wellbeing scores stayed in the narrow rangeof 56.5 to 57.5 (out of 100). In the month of December 2020, however, financial wellbeing increased to 58.2
(out of 100), indicating some initial signs of national recovery.

While all components of financial wellbeing declined post COVID-19 (Table 1), the biggest decline in the
9 months to December 2020 was in ‘feeling comfortable’ about one’s current and future situation, down
10.0% for the 9-month rolling average to December 2020 (50.4) compared to the 12 months to March 2020
(56.0). However, ‘feeling comfortable’ scores recovered slightly since our last update to be in the range of
50.1 to 53.3 (out of 100) for the spot months of September through December 2020, compared to 47.5 to49.6 (out of 100) for the months of April through August 2020.

‘Meeting everyday commitments’ was down 6.4% for the 9 months
to December 2020 (68.3) compared to the 12 months to March 2020 (73.0).

‘Resilience for the future’ – the ability to cope with financial setbacks –declined by 1.1% for the 9 months to December 2020 (52.6) comparedto the 12 months to March 2020 (53.2).

•

LOOKING AHEAD

IN THIS RELEASE• Future releases will monitor the effects of COVID-19 on
financial wellbeing which are anticipated to continue
for some time, particularly for those segments of thecommunity disproportionately impacted, such as people
who were already ‘struggling’ prior to the pandemic,
younger people ‘Struggling’ or ‘Getting By’, small andmicro business owners and occupations in exposedindustries. The extent of the impact will depend on
the strength of Australia’s economic recovery once
government and institutional support ends.

• Nine months after the beginning of the COVID-19
pandemic the impact on financial wellbeing has led
to an increase of the size of both the ‘Struggling’ and‘Getting By’ segments while the ’No Worries’ segment
reduced substantially (Figure 2). Although there has
been some improvement with more people reporting
high financial wellbeing (‘No Worries’) in the lastquarter of 2020.
• Financial wellbeing has declined across all states
and territories. The largest decline in the 9 months
to December 2020 was in the ACT (down 7.8%), withthe smallest decline in WA (down 2.2%) (Figure 3). Whilestill down 7.7% post COVID-19, Victoria experienced
significant recovery in financial wellbeing following
the easing of restrictions in October.

01

QUARTERLY UPDATE: MARCH 2021

FIGURE 1: FINANCIAL WELLBEING IN AUSTRALIA,MONTHLY SPOT DATA AND 12-MONTH MOVING AVERAGE (JAN-14 TO DEC-20)

64
62
60

58.2
57.7

58
56
54
52

Indicator Spot resultDec-20Jul-20

Oct-20

Apr-20Jan-20

Oct-19Jul-19Apr-19Jan-19Oct-18

Jul-18Apr-18Jan-18Oct-17

Jul-17Jan-17Oct-16

Apr-17

Jul-16

Apr-16

Jan-16Oct-15

Jul-15Jan-15

Apr-15

Jul-14Oct-14Jan-14Apr-1450

Indicator 12MMATABLE 1: FINANCIAL WELLBEING DIMENSIONS IN AUSTRALIA(12-MONTH MOVING AVERAGE, SPOT MONTH AND 9-MONTH MOVING AVERAGE VIEW)ANZ Roy Morgan FWB Indicator

12 months

Dec-19 Mar-20

9 months
to%December change
2020

Spot Result

Apr-20 May-20

Jun-20Jul-20 Aug-20

Sep-20

Oct-20 Nov-20 Dec-20

Apr toDec-2012m toMar-20vs
9m to
Dec-20Financial
wellbeing

60.2

60.7

56.5

56.5

56.5

57.0

57.0

57.5

57.0

56.6

58.2

57.1

-5.9%

Meetingcommitments

71.9

73.0

70.1

67.9

67.9

69.5

67.8

69.4

67.4

67.1

68.2

68.3

-6.4%

Feeling
comfortable

55.9

56.0

47.5

49.2

49.2

49.5

49.6

50.1

51.3

50.7

53.3

50.4

-10.0%

Resilience forthe future

52.7

53.2

52.1

52.3

52.5

52.1

53.6

53.0

52.3

51.9

52.9

52.6

-1.1%

02

QUARTERLY UPDATE: MARCH 2021

FINANCIAL WELLBEING SEGMENTS
Respondents were divided into four segments according
to their overall financial wellbeing score (out of 100). Thesesegments were described in ANZ’s 2017 ANZ Financial
Wellbeing Survey1:• Struggling: (0–30) Most describing their current
financial situation as ‘bad’, having little or no savings andfinding it a constant struggle to meet bills and credit
payments. Very few are confident about their financial
situation over the next 12 months.
• Getting By: (>30–50) Many describing their financial
situation as ‘bad’, less confident in their money
management skills and their ability to control theirfinancial future.
• Doing OK: (>50–80) Current financial situation is ‘fair’or ‘good’ and reasonably confident about their financial
situation over the next 12 months.

• No Worries: (>80–100) Financial behaviours – active
savings and not borrowing for everyday expenses –contributing positively to financial wellbeing. High levelsof confidence in managing money and substantial
amounts in savings, investments and superannuation.
The proportion of people with the highest financial
wellbeing (‘No Worries’) declined with the onset of
COVID-19, from 22.4% in the 12 months to March 2020
to 18.1% in the 9 months to December 2020, although
this has improved from our last update with more people
reporting high financial wellbeing in the last quarter of2020. Whilst the majority of the Australian population(45.2%) were ’Doing OK’, this had also contracted from
47.6% in the 12 months to March 2020.
The bottom two segments ‘Getting By’ and ‘Struggling’
both increased post COVID-19, now representing 36.7%
of Australians in the 9 months to December 2020 (up from
30% in the 12 months to March 2020), with 22.3% ‘Getting
By’ and 14.4% ‘Struggling’, the latter of which is yet to show
signs of improvement (Figure 2).

FIGURE 2: CHANGE IN THE COMPOSITION OF THE FINANCIAL WELLBEING SEGMENTS(‘PRE COVID-19’ 12 MONTHS TO MAR-20 VS 9 MONTHS TO DEC-20 ‘POST COVID-19’ VIEW)

No Worries 22.4%

Doing OK 47.6%

Getting By 17.8%

No Worries 18.1%

Doing OK 45.2%

Getting By 22.3%

Struggling 12.2%

Struggling 14.4%

Pre COVID-19

Post COVID-19

Note: Pre COVID-19 data includes the 12 months to March 2020. Post COVID-19 data includes data from the months of April 2020 through to December 2020.

1. ANZ (2018). Financial Wellbeing: A Survey of Adults in Australia. http://www.bluenotes.anz.com/financialwellbeing

03

QUARTERLY UPDATE: MARCH 2021

FINANCIAL WELLBEING BY STATE AND TERRITORY
The impact of COVID-19 resulted in allstates and territories recording lower
scores in overall financial wellbeing andmost states and territories recording
lower scores in all the three dimensionsof financial wellbeing for the 9 months
to December 2020 (post COVID-19)(Figure 3).
Respondents from ACT had the highest financial wellbeingscore of 61.2 (out of 100) post COVID-19 in the 9 months to
December 2020, 4.1 points higher than the national averageand 2.8 points higher than WA with the next highest levelof financial wellbeing (58.4). Queensland had the lowest
level of financial wellbeing at 55.9 (out of 100) (Figure 3).

The ACT experienced the largest decline in financial
wellbeing in the 9 months to December 2020, down
7.8%, though it still sits comfortably above the national
average (61.2). Victoria experienced the second largest
decline (down 7.7%) and while it is currently well below
the ACT, financial wellbeing in Victoria was still above
the national average, after experiencing significant
recovery since the easing of restrictions in October(Figure 3). WA experienced the smallest decline infinancial wellbeing (down 2.2%). While previously
sitting below the national average, financial wellbeing
in WA is now above the national average (Figure 3).

FIGURE 3: FINANCIAL WELLBEING IN AUSTRALIA, BY STATE AND TERRITORY(‘PRE COVID-19’ 12 MONTHS TO MAR-20 VS 9 MONTHS TO DEC-20 ‘POST COVID-19’ VIEW)

68
66

66.4

64

7.8%

62
60

62.3

57.1

57.5

56.9

61.0

60.5

5.9%

58
56

61.2

60.9

60.7

58.5

59.7
57.4

2.2%
58.4
56.7

55.9

54
52
50

AUS

Pre COVID-19

NSW

ACT

VIC

QLD

SA

WA

TAS

Post COVID-19

Note: Pre COVID-19 data includes the 12 months to March 2020. Post COVID-19 data includes data from the months of April 2020 through to December 2020.

04QUARTERLY UPDATE: MARCH 2021

ABOUT THE ANZ ROY MORGAN FINANCIAL
WELLBEING INDICATOR
The indicator is derived from data gathered throughthe weekly Roy Morgan Single Source interview andsurvey, which canvasses approximately 50,000 Australians
annually. The breadth of data gathered through Roy
Morgan Single Source enables examination of Australians’
financial wellbeing at a more granular level than was
possible with previously available data.

The ANZ Roy Morgan Financial
Wellbeing Indicator is a statisticallyrobust snapshot of the personal
financial wellbeing of Australians,
reported as a 12-month moving
average every quarter.
The Indicator is based on the Kemspon et al. conceptualmodel of financial wellbeing that was tested by ANZ in its
2017 financial wellbeing survey (Figure 4). The Kempson
model acknowledges five drivers that have a proportionate
impact on personal financial wellbeing:• social environmentMore information about the Indicator can be foundat bluenotes.anz.com/financialwellbeing
or by contacting:• economic environment• financial knowledge and experience• psychological factors (attitudes, motivations sand biases)• financially capable behaviours.

The indicator is reported quarterly and periodically.
Releases are accompanied with a focus on specificdeep dive topics.

Natalie Paine, Manager Financial Inclusion
Natalie.Paine@anz.com
Simon Edwards, Research and Insights Lead
Simon.Edwards@anz.com

FIGURE 4: THE FINANCIAL WELLBEING CONCEPTUAL MODEL

Financial knowledge
and experience(9%)

Psychological factors(16%)

Social environment(16%)

Financiallycapable behaviour(45%)
Personal financial
wellbeing

Economic environment(14%)

Source: Adapted from Kempson et al, 2017, with additional data from the 2017 ANZ Financial Wellbeing Survey.

05

QUARTERLY UPDATE: MARCH 2021

TECHNICAL APPENDIX
The data items used for the calculationof the indicator and other data items
used to measure various drivers of
personal financial wellbeing, all derivefrom the questions listed below fromthe Roy Morgan Single Source interview
and survey.

The indicator is calculated by an algorithm that transforms
responses to these questions, weighing the relative
importance of each component. The algorithm wasdeveloped based on calibrated responses to 11 questionsin the 2017 ANZ Financial Wellbeing Survey2, as well as
answers to the questions below.
There are many additional questions in the Roy Morgan
Single Source data collection that are of relevance andcan be used as filters or as cross-tabulation variables with
the Indicator. The complete list of these variables are notlisted here.

ANZ Roy Morgan
FWI dimensions

Questions and items from Roy Morgan Single Source

Meeting commitments

Q. Meeting my bills and commitments is a struggle from time to time
Q. In the past 12 months I have sometimes been unable to pay bills or
loan commitments at the final reminder due to lack of money
Q. I sometimes run short of money for food or other regular expenses

Feeling comfortable

Q. I feel financially stable at the moment
Q. I have planned enough to make sure I will be financially secure in the future
Q. Would you say you and your family are better-off financially – or worse-off than
you were at this time last year?
Q. Looking ahead to this time next year… do you expect you and your family
to be better-off financially – or worse-off than you are now?

Resilience

Number of months’ income in savings calculated using following questions:
Q. Household’s total present approximate weekly or annual income fromall sources before tax – please include all wages, salaries, pensions andother income
Q. Would you please say the approximate amount that is in the (main/second)(say institution and account name) account as of today
Managing a drop in income by a third is calculated using the following questions:
Q. Household’s total present approximate weekly or annual income from all sources
before tax – please include all wages, salaries, pensions and other income
Q. Approximate amount that is in the (main/second) (say institution and accountname) account as of today
Q. How much does your family spend on all living and household expenses in an
average week? Please include all expenses such as shopping, luxuries, transport
costs, bills, credit and loan repayments, rent and home loans, school fees etc.
(if living in a shared household, only include your own total living expenses)

2. For more information on the 11 financial wellbeing questions, see page 41 of Financial Wellbeing: A Survey of Adults in Australia. Retrieved fromhttps://www.bluenotes.anz.com/content/dam/bluenotes/images/financial-wellbeing/ANZ%20Financial%20Wellbeing%20Summary%20Report%20-%20
Australia.pdf

06