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The Experience of Financial Hardship in Australia: Causes, Impacts and Coping Strategies

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E. Bourova
E. Bourova
E. Bourova
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I. Ramsay
I. Ramsay
I. Ramsay
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P. Ali
P. Ali
P. Ali
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Abstract

This article outlines the findings of Australia’s first large-scale study on the experiences of people who have recently been unable to pay a debt when it fell due. The study builds upon empirical research on the causes and impacts of financial hardship in the United Kingdom and the United States, and examines the coping strategies that debtors employ to deal with their predicament. The study shows that although an overall increase in economic insecurity since the 1980s – together with rising living costs and rapid growth in household debt – have created a situation in which financial hardship can happen to almost anyone, people who are already in a position of socio-economic disadvantage are especially at risk. Debtors at all levels of income favour individualistic strategies for reducing their expenditure – for some, to the point of foregoing essential living needs. However, for debtors on social security incomes, financial hardship has particularly serious consequences, impacting negatively on health, relationships, and social inclusion, and undermining their ability to afford necessities such as food, heating, and medical care. This article undertakes an analysis of these findings in the context of the literature on economic insecurity, disadvantage, and the growing financialization of everyday life in Australia and overseas.
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ORIGINAL PAPER
The Experience of Financial Hardship in Australia: Causes,
Impacts and Coping Strategies
E. Bourova
1
&I. Ramsay
2
&P. Ali
2
Received: 18 May 2017 /Accepted: 24 September 2018 /Published online: 25 October 2018
#Springer Science+Business Media, LLC, part of Springer Nature 2018
Abstract
This article outlines the findings of Australia’s first large-scale study on the experiences of
people who have recently been unable to pay a debt when it fell due. The study builds upon
empirical research on the causes and impacts of financial hardship in the United Kingdom and
the United States, and examines the coping strategies that debtors employ to deal with their
predicament. The study shows that although an overall increase in economic insecurity since
the 1980s –together with rising living costs and rapid growth in household debt –have created
a situation in which financial hardship can happen to almost anyone, people who are already in
a position of socio-economic disadvantage are especially at risk. Debtors at all levels of
income favour individualistic strategies for reducing their expenditure –for some, to the point
of foregoing essential living needs. However, for debtors on social security incomes, financial
hardship has particularly serious consequences, impacting negatively on health, relationships,
and social inclusion, and undermining their ability to afford necessities such as food, heating,
and medical care. This article undertakes an analysis of these findings in the context of the
literature on economic insecurity, disadvantage, and the growing financialization of everyday
life in Australia and overseas.
Keywords Financial hardship .Causes .Impacts .Coping strategies
Journal of Consumer Policy (2019) 42:189–221
https://doi.org/10.1007/s10603-018-9392-1
*E. Bourova
evgenia.bourova@unimelb.edu.au
I. Ramsay
i.ramsay@unimelb.edu.au
P. Ali
p.ali@unimelb.edu.au
1
Financial Hardship Project, Melbourne Law School, The University of Melbourne, 185 Pelham
Street, Carlton, VIC 3053, Australia
2
Centre for Corporate Law and Securities Regulation, Melbourne Law School, The University of
Melbourne, 185 Pelham Street, Carlton, VIC 3053, Australia
Content courtesy of Springer Nature, terms of use apply. Rights reserved.
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... Other public policies impacting financial wellbeing include employment support following COVID-19 (Churchill, 2021), the structure of Australia's retirement income system (Gallery et al., 2011), Australia's national broadband internet network (Bourova et al., 2019), Australia's national financial capability strategy (Australian Government, 2022), regulatory bodies (Buckland et al., 2020), public healthcare (Banks & Bowman, 2017), tax policies (Buckland, 2018), family supports (Marx et al., 2015), interest rates (Muir et al., 2017), and income management (Bielefeld, 2018). ...
... Social security is another policy area which is closely connected to financial wellbeing. Who can access social security support, and how much support they can access, has a significant impact on financial wellbeing (Bourova et al., 2019). This means that the filtering mechanisms which govern access to support are important, and in countries like Australia, access to support is becoming increasingly conditional (Collie et al., 2021;Considine et al., 2022). ...
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... 4 Proportions of families experiencing financial hardship were 17.91%, 8.60%, 4.18%, and 2.4% for one, two, three, and four plus periods, respectively. 5 These values are consistent with previous research that shows experiences of poverty (measured by household income below a poverty threshold) are largely transient (Stevens 1994). of experiencing financial hardship (Bourova et al. 2019;Heflin 2016;Heflin and Butler 2013;Heflin et al. 2009;Sullivan et al. 2008). These are (1) unforeseen expenses (e.g., car repairs or unexpectedly high utility bills), (2) a lack of income, (3) physical and mental health problems, (4) a lack of employment, and (5) changes to family composition. ...
... These are (1) unforeseen expenses (e.g., car repairs or unexpectedly high utility bills), (2) a lack of income, (3) physical and mental health problems, (4) a lack of employment, and (5) changes to family composition. Bourova et al. (2019) showed that the most common experience in the lead up to financial difficulties was unforeseen expenses (37%). This was followed by relying on welfare support (i.e., lack of income) (33%) and unexpectedly high utility costs (27%). ...
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... Hayne (2019) too has advocated the importance of counseling services in achieving the financial well-being of deprived citizens. Financial counseling can also aid financially stressed individuals by improving their financial behavior and raising their confidence in financial skills (Bourova et al., 2019;Pollard et al., 2020). It also helps overcome individual behavioral biases (Hoechle et al., 2017). ...
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  • Oct 2015
Financialisation, understood as the increased role of finance in individuals' daily lives as well as the economy in general, has profound implications for the relationship between individuals and the state. This article therefore interrogates recent developments in welfare provision in the UK, in particular the 'financial inclusion' agenda, in order to assess how financialisation is affecting the nature and practice of citizenship. By associating institutional change with the UK's prevailing model of economic growth, it offers an original account of both the persistence of the financial inclusion agenda despite challenges posed by the financial crisis, and the 'responsibilisation' of citizenship.
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The Fragile Middle Class: Americans in Debt
Article
  • May 2001
Since 1997, the number of American families filing for federal bankruptcy annually has exceeded one million. By most measures, those who file are members of the middle class - a group that has long provided stability and vitality for the American economic system. This raises the troubling question: why, during the most remarkable period of prosperity in our history, are unprecedented numbers of Americans encountering such serious financial trouble? The authors of this important book analyse court records and demographic data on thousands of bankruptcy cases, as well as debtors' own poignant accounts of the reasons for their bankruptcies. For many middle-class Americans, the findings show, financial stability is fragile - almost any setback can be disastrous. The erosion of job stability, divorce and family instability, the visible and invisible costs of medical care, the burden of home ownership, and the staggering weight of consumer debt financed with plastic combine to threaten the financial security of growing numbers of middle-class families. The authors view the bankruptcy process in the light of changing cultural and economic factors and consider what this may signify for the future of a large, secure, and dynamic middle class.
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