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Monday, 30 July 2018

Ill at ease

Let's talk about stress

I think it'd be fair to say that I'm healthily sceptical about much of what is published about mortgage stress.

After all, mortgage rates are very low indeed, unemployment is reasonably low (and falling to the lowest level since 2012), and 30-plus day arrears are generally low outside a few recessionary hotspots.

So, yeah. 

But as I've discussed in recent podcasts, life's often a helluva lot easier for those of us that took out mortgages at higher rates years ago and have seen them come down than it is for newer borrowers or those trying to save for larger home deposits. 

Doctor, doctor, my insurance expired...

One interesting soft metric to look at is recent trends in private health insurance. 

Hospital membership insurance in Australia has generally increased over time from much lower levels in the 1990s. 

And this continued for some of the older age cohorts in 2017, particularly for those enjoying life beyond the traditional retirement age. 

However, as a share of the total population, hospital membership has begun to reverse in recent years. 

And there was quite a notable 5.3 per cent drop in the 25 to 29 age group last year (click to expand).

Source: APRA

To some extent perhaps this isn't all that surprising or irrational, with the average premium for hospital insurance for younger people costing a significant chunk of disposable incomes, and most younger claimants clawing back on average far less than they paid in. 

The benefits of health insurance paid out increase substantially as you move up through the age brackets, so plenty more of millennials and younger Aussies have apparently opted not to bother.

Slow wages growth across the past couple of years must be a considerable factor in this equation.

Licensed to ill

Perhaps also unsurprisingly the Australian Capital Territory retained the highest coverage of hospital insurance at 55.4 per cent of the resident population. 

However, hospital coverage as a percentage of the population declined across all jurisdictions last year, continuing a downtrend which appears to have taken hold in 2016.

Despite a big ramp up through the mining boom, the Northern Territory still has the lowest hospital coverage at 40.4 per cent. 

Intergenerational cleft

Now for sure there might be any number of reasons for these declines, and this might not be an indicator of stretched household budgets at all.

Perhaps the comparatively high rate of immigration in the under 30s age cohort has made a difference to the statistics, for example, since such insurances are in many cases far less common overseas than they are in Australia. 

On the other hand given that more older Aussies are opting to take out insurance but 30,000 fewer of those aged 25 to 29 over the past two calendar years, you could equally make a case for mortgage and rental market duress having altered a few spending choices. 

Youthful males have always had a tendency to feel somewhat invincible, of course, and men aged 25 to 29 are particularly under-represented when it comes to hospital treatment membership - which is fine, as long as you don't get ill! 

A moderate discount for those aged under 30 will be available from next year, but whether that's enough to encourage more to take up coverage remains to be seen.