Measuring Financial Exclusion in Australia

One in seven Australian adults are either fully or severely excluded from accessing basic financial services, according to the newly released NAB/CSI Financial Exclusion Indicator.

The study found that one in seven Australian adults did not have access to basic financial services, such as a transaction account or a small personal loan, leaving them susceptible to predatory lending practices.

The National Australia Bank (NAB) and the Centre for Social Impact (CSI) joint study also found that 2.65 million Australian adults would have difficulty raising $3000 in an emergency.

NAB Group CEO Cameron Clyne says financial exclusion needs to be better understood by governments, the financial sector and community organisations, in order to put in place remedies.

Clyne says financial exclusion can often lead to a debt spiral, where people who do not access financial services from banks instead turn to fringe or unregulated lenders who can charge prohibitive interest rates.

He says this is the first time the extent of financial exclusion in Australia has been measured, and the study will enable government, the financial sector and community organisations to better plan for the financially excluded into the future.

According to the NAB/CSI Financial Exclusion Indicator, the factors leading to financial exclusion include:

• Cost – the average annual cost of basic financial services (a basic transaction account, a low rate credit card, and some basic general insurance) in Australia is $1740. The report says that is more than 15 per cent of income for around 10 per cent of adults in Australia;
• Accessibility – Internet banking is only used by 54.5 per cent of the population and access to ATMs in rural and remote areas is more difficult than in urban areas;
• Demographics – people with low levels of education, born overseas with English as a second language, aged under 24 or over 65, or unemployed are more likely to be excluded;
• Supply – including the promotion of inappropriate credit products and the absence of basic, affordable insurance products.

CSI lead author and researcher Chris Connolly says financial exclusion has significant day to day impacts for those affected.

Connolly says in an emergency people who are financially excluded are more likely to turn to fringe or unregulated lenders who compound the problem, making it far more likely they will also experience social exclusion and financial stress as a result.

He says the study helps to better understand why financial exclusion occurs and the impacts, which they hope will lead us to reduce financial exclusion in Australia over time.

Cameron Clyne says that as a country with a well-regulated and well-managed financial services industry, people should not suffer financial exclusion.

Director of CSI, Professor Peter Shergold says as the largest study of its kind, the Financial Exclusion Indicator will guide public policy and influence corporate practice in Australia.