Seven money trends that Australians must watch now

COVID-19 put a rocket under some major financial shifts. This is where the changes are now coming from across Australia.

Trends in finance and technology accelerated rapidly in 2020 and the fast pace of change is tipped to continue this year and impact the way Australians earn, spend, save and invest.

Our personal finances will be affected by the economy, financial markets and the vaccine rollout, according to money specialists, who say some trends are here to stay.

Here are seven to keep an eye on.

1 LOWER INCOMES

People management platform Employment Hero’s head of financial wellness, Ray Jaramis, said Australians would earn less than they did last year.

“We saw a new record low for wage growth in 2020, which tells us employers simply do not have the same resources or cash available to pay staff the same pay rises and bonuses of previous years,” he said.

Combine this with the sharp winding back of government COVID stimulus payments, and it will be slimmer pickings financially for a majority of Australians in 2021.

2 CAREFUL SPENDING

MyBudget director Tammy Barton said uncertainty around COVID and the economy meant more people felt having a financial safety net was important.

“We’ll see less spending and borrowing for luxury items, and more people building up money in the bank for a rainy day,” she said.

People’s Choice Credit Union spokesman Stuart Symons said the “saving for security” habit would continue well into 2021 and at least until new COVID-19 vaccines were broadly distributed.

People's Choice Credit Union spokesman Stuart Symons expects savers to stay conservative.

3 DEBT DESTROYERS

Consumers wiped out more than $7 billion of their high-interest credit card debt in 2020, and digital lender WLTH’s co-founder, Brodie Haupt, said it was a behavioural shift that would continue this year.

“Australians will continue to save more and eliminate high-interest debt by paying off credit cards or consolidating their debts when refinancing their home loans, as well as taking advantage of the low-interest rates available in the market,” he said.

4 DIGITAL DOLLARS

The digital banking wave gained momentum during 2020’s lockdowns, with consumer demand now driving change, and Mr Symons said research had found older Australians were not as technology-resistant as first thought.

“Doing all your banking online is absolutely going to be the new normal and 2021 will see financial institutions introduce more and more digital services – not just transfers and payments but even those things that used to require a meeting and a document signed will be done on your computer or phone,” he said.

5 VIDEO BANKING

After a year that brought video meetings to almost every household, it’s now expected to grow “from queries and requests to loan discussions and financial advice”, Mr Symons said.

“This won’t just be through your own computer, video will be incorporated more and more into branches for both information and live interactions.”

Low interest rates are helping to fire up house prices again.

6 INTEREST IMPACTS INVESTMENTS

Record-low interest rates are expected to hang around for a few years, prompting forecasts of price rises for Australia’s housing and sharemarkets as investors chase higher returns.

Several forecasters have tipped home values to improve 5-10 per cent annually for the next two or three years.

The outlook is generally positive for Aussie shares, which did not surge as much as overseas markets such as the US last year. But a growing chorus of market watchers say the US market, led by its tech giants, has run too far and is heading for a sharp fall.

CommSec chief economist Craig James said the Reserve Bank had committed to keep the official interest rate at 0.1 per cent until late 2023.

7 CLIMATE CASH

Companies that combat climate change are expected to be big investment winners in the coming years.

Munro Partners chief investment officer Nick Griffin said climate was the “big structural opportunity in the world for the next 20 years”.

“Clearly Joe Biden winning the presidency was helpful but it was all going to happen anyway before that,” he said.

“The decarbonisation of the planet is going to happen, period. There’s too many stakeholders on-board here. (Countries and companies) are not saying emit less carbon – they are saying emit no carbon.”

The boom in Tesla’s share price last year was an example and “there will be others”, Mr Griffin said.

Jacqueline Alanne owns sustainable fashion business Finn Boutique. Picture: Keryn Stevens

EMBRACING CHANGE

Jacqueline Alanne has experienced many of the money trends that have swept through Australia during the pandemic.

“I think everyone felt the need to have a nest egg,” she said.

“I certainly did. By not being able to go anywhere I did save a lot of money, but at the same time I spent more online on things like skincare and wine, partly out of boredom.”

Ms Alanne, 29, is also part of the global focus on sustainable and ethical businesses, and owns sustainable fashion business Finn Boutique.

“I carefully repair items to make sure they can stay in circulation, and I make sure the cleaning chemicals aren’t harmful,” she said.

“I think whatever the business, we can always do more.”

Like many Australians, Ms Alanne does most of her banking online and is open to video banking.

“It would be nice and productive, so I wouldn’t have a problem with it,” she said.

“I’m sure the institutions would ensure there wouldn’t be any security issues. We’re all busy so I’m very happy not to have to add going to the bank to my list of tasks.”

Originally published as Seven money trends that Australians must watch now