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Australians confident in their finances following COVID-19, but we're not in the clear

Despite the impending expiration of government assistance, Australians are feeling more confident in their finances, new research from global information services company Experian reveals.

Two fifths (42%) of those surveyed are feeling stable in their financial lives, an increase of 17% since October 2020.

In fact, Experian’s Global Insights Report demonstrated a clear positive increase in consumer confidence since the beginning of the pandemic.

It found that only a quarter of Australians are now adjusting their spending costs compared to a third of people in October.

Furthermore, 1 in 10 are cutting back on discretionary spending, half the number reported six months ago 33% are finding bill payments difficult – a decrease from July (45%) and October (43%), and only 9% of Australians are feeling the need to save more in their emergency funds post COVID-19.

However, businesses are wary this confidence will be short lived and are predicting many consumers will be calling out for help once the JobKeeper buoyancy period is over.

The report highlights rent and mortgage payments is what 19% of Australian businesses anticipate will drive the greatest increase in demand for support from customers.

Furthermore, almost half (49%) of businesses are concerned about collections in a post COVID-19 era according to the findings.

This has led to 71% of Australian businesses putting plans in place to help manage their customers out of arrears stemming from the pandemic and investing in improving business operations to better assist their customers.

Two thirds of Australian businesses are now also investing in advanced analytics or AI to improve digital customer service.

The research also revealed that only 58% of businesses feel confident in their credit risk analytical models - a 14% drop since October. 75% are looking to either recalibrate and improve their existing models or rebuild them from scratch.

To help them better manage credit risk, 86% of business decision makers said they will be implementing on-demand cloud based decisioning applications this year. Similarly, 83% reported they are now looking to integrate an automated decision management solution this year.

Experian general manager of decision analytics, Mathew Demetriou, says, “The various Government support programs have enabled Australians to avoid overdue debt throughout 2020, however our bureau shows some possible concerning trends as these begin to come to an end.

“Although last year's data may not be indicative of what’s to come in 2021, until more data on payment delay roll offs and hardship is available, businesses are right to prepare for a period of uncertainty and help their customers navigate potential repercussions of previous payment pauses."

Demetriou saysm “The pandemic has altered the way we assess consumer credit risk and this will continue to evolve this year as Government stimulus ceases.

"So it’s understandable that businesses are less confident in the effectiveness of their analytical models for credit risk now – it’s a much more fluid environment.”

He concludes, “The implementation of these enhanced decisioning applications will help businesses alleviate the expected repercussions of this buoyancy period that has been shaped by COVID-19 and Government assistance.”