MOST Australian adults would fail a test on household finances and many would only last a month on their current savings if they lost their job, a new survey shows.

The Citi Fin-Q Survey, conducted by Citibank, found that only 28 per cent of people save something from each pay packet and 50 per cent save when they can, while 22 per cent rarely save anything.

The survey of 400 Australian respondents - as part of a wider survey of 4400 people across 11 Asia-Pacific countries - found that 45 per cent would last up to one month only on their savings to pay their current usual expenses - mortgage, food, utility bills - if they lost of their job.

It also found that just 34 per cent of people have sufficient insurance to ensure loved ones won't suffer financially in the event of death, sickness or disability, while 18 per cent only have life insurance.

Nearly half didn't have any insurance at all, including 45 per cent of people with children.

Citibank's national manager investment advice Joanne Morgan says there were some positives from the survey, but generally it's more a case of financial ill-health than financial wellbeing.

"We have found many of the basic steps needed to help achieve financial wellbeing are being neglected," she said.

"A lot of people aren't budgeting - and when they do, they don't stick to it.

"Regular savings is haphazard at best, almost half of Australians don't have any insurance whatsoever and almost three quarters don't have a current will."

Citibank asked respondents a series of questions to measure their financial wellbeing that gave a score out of 100.

The average result was 44.1.

The survey found that just 26 per cent per cent of people would know exactly what to do if they had a sum of money equal to six months salary to invest, while 53 per cent would have some idea. and 22 per cent wouldn't have a clue.

Thirty-two per cent of men compared to 20 per cent of women would know exactly what to do with the money.

On their current quality of life, only 19 per cent are very satisfied, 58 per cent are satisfied and 23 per cent are not.

Similarly, on their financial future, only 15 per cent are very optimistic, 56 per cent are optimistic and 29 per cent are worried.

"When it comes down to it, low levels of financial literacy are at the root cause of our financial ill-health," Ms Morgan said.

"With a greater focus on financial education there is no doubt the Fin-Q score would be higher."

She said Citibank was making the financial education of its people a priority and is launching a financial health day that will give its workers eight hours leave per year to review and take action on their finances. "After all, we want a financially fit workforce, not an unhealthy one."

CONSUMERS have been warned there will be no escaping an interest rate hike next month - and it could be a double whammy.

Explosive documents released yesterday showed the Reserve Bank Board almost went for the shock treatment earlier this month as it battles to control inflation.

Leading economists said yesterday there was a big chance the central bank would push up rates by half of a percentage point next month – double the usual increase. This would ramp up monthly repayments on a $300,000 home loan by $100.

It will also lift standard variable rates on home loans to almost 10 per cent and add to the misery of many homebuyers.

The Reserve Bank normally raises rates by only a quarter of a percentage point but this tradition could be overturned next month.

"Not only does this shore up the case for a hike in March, but it suggests a more aggressive move might be needed," Macquarie Bank's Brian Redican said.

There were more danger signs yesterday when the Reserve's assistant governor Malcolm Edey warned inflation would almost hit 4 per cent in the next quarter.

The last time the Reserve Bank ordered a half a percentage point rise was eight years ago. If rates do rise by the bigger amount it will take take the cash rate to 7.5 per cent – the highest level since 1995.

Interest rates have jumped 11 times in the past six years, plunging Australian families into mortgage stress.

Federal Treasurer Wayne Swan told Parliament that the Rudd Government was working with the Reserve Bank and remained "committed to putting downward pressure on inflation and downward pressure on interest rates".

Prime Minister Kevin Rudd again tried to shift the blame, saying his Government inherited an economy with underlying inflation running at a 16-year high.

But Opposition Leader Brendan Nelson maintained the economy was in "first-rate shape" when the Coalition lost office late last year.

Under new independence rules, the Reserve Bank for the first time yesterday released the official minutes of its February 5 board meeting.

The document showed the board was very close to raising rates earlier this month by half of a percentage point.

The minutes said "there was a case for the board to send a stronger signal of its intention to act as necessary to reduce inflation".

In the end the bank decided on a smaller increase, although it warned it would continue to review the policy.

The Reserve Bank will meet again on March 4.

Building approvals surged in November, spurred on by a sharp increase in new apartment buildings in NSW according to the latest data from the Australian Bureau of Statistics (ABS).

Total units approved jumped by 8.9% after dropping by 3.6% in October. There were 14,620 dwelling approvals in November - the highest result in three and a half years. On a year-on-year basis, this represents 14.6% growth in new buildings approved. Detached housing remained in the doldrums however, notching up a small gain of 0.30%.

CommSec chief economist Craig James says that the trends are very "encouraging". "For the first time in almost three years, the number of approvals can be finally described as 'above-normal', that is, above the longer-run averages," he says. 

"Overall, we believe that there's a light at the end of the tunnel for the beleaguered home building industry. Demand for accommodation is soaring, with population growth at the strongest pace in 18 years, while supply of new homes has been struggling to keep up."

The strong numbers are also seen as a sign that investors may be shifting their attention from the sharemarket following a massive decline in the recent weeks.
"It may be the case that investors are warming to higher house prices and surging rents, and starting to shift attention from the sharemarket to the property market," says James. "Property will be seen as an especially favourable investment destination if the sharemarket continues its soggy performance in coming months."

Housing Industry Association (HIA) chief economist Harley Dale says the strong numbers from the unit sector may indicate that the bottom of the cycle has passed, however he warns that there is a long recovery road ahead following four years of weakness.

"The first half of 2008 is going to be a challenging period for new home building amidst upward pressure on interest rates. It will be difficult for a sustained recovery in new home building to emerge," says Dale.

Source: Your Mortgage Magazine

The Federal Government says it is alarmed by a new report that has found Australians are turning to their superannuation to help them escape a mortgage crisis.

The ACT Consumer Law Centre report calls for more data to be released on home repossessions and the early release of superannuation.

The report found there has been a dramatic increase since 2005 in the number of Australians making early withdrawals from their superannuation to stop them losing their homes.

Member for Canberra Annette Ellis says the Federal Government is concerned about non-bank lenders in the home lending market.

"What this report is showing, alarmingly, is the percentage of house repossessions is so out of kilter in that area of lending to the share of the market that they actually have," she said.

Ms Ellis says it is likely to be an issue of discussion at future Council of Australian Government meetings.

"This is very important when we're talking about housing affordability which was one of our major planks in the election," she said.

Pauline Ridge from the Austrailan National university has backed the report's finding that tighter regulations are needed to ensure people receive proper financial advice.

"We'd like to see tighter regulations to ensure that people are getting proper, objective advice before they make such an application and this isn't really just contributing to a downward spiral where the money is really going to pay extra costs and fees associated with finance," she said.

The report also found those who refinance to escape a mortgage crisis lose their homes more quickly than those who do not.

The Reserve Bank of Australia (RBA) will be happy with the latest credit figures, economists say. However, the softer figure probably will not be enough to stop the bank raising rates in February. Total credit provided to the private sector by financial intermediaries rose 1.0 per cent in October, following a 1.1 per cent rise in September, the Reserve Bank of Australia (RBA) said on Friday.

Over the year to October, total credit rose 15.4 per cent. Housing credit rose 0.8 per cent in October and by 11.6 per cent over the year, seasonally adjusted. Other personal credit was 0.6 per cent higher in October and rose 12.3 per cent over the year, while business credit rose by 1.4 per cent in the month and increased 21.7 per cent over the year.

“The Reserve Bank would probably be fairly happy with growth of about 1 per cent rather than the 1.5 per cent we were getting not so long ago,’’ Commonwealth Bank economist Joseph Capurso said.

The Australian Securities and Investments Commission has announced it will take legal action on behalf of investors in the Westpoint Group seeking compensation for their failed investments.

The regulator said it believed the legal action, over a number of phases, if successful could provide benefits to as many as 3,600 of the 4,300 investors in the failed property scheme.

Property prices across the country continued their strong run, despite the higher cost of borrowing and concerns about the impact of the US sub-prime crisis.

The latest numbers from RP Data-Riskmark Hedonic Index showed that Australia's property prices jumped by 7.7% during the first seven months of the year to the end of July. In the 12 months ending the same period, property values across the country grew by 9.2% - beating many forecasters' predictions.

In the rental market, the best yielding cities for investors looking to buy apartments are Canberra with units in the capital city achieving rental yields of 6.5%, followed by Darwin (5.9%), Adelaide (5.4%), Sydney (5%), Brisbane (5%), Melbourne (4.6%) and Perth (3.9%) according to the report.

Westpac Banking Corp. announced that it has reached agreement to acquire the brand and franchise assets of the Sydney-based Rams Home Loans Group for a cash consideration of A$140 million. Westpac specified that this acquisition expends its Australian distribution footprint by 10%. The transaction is expected to complete during early January 2008. Westpac said it has planned for the continuity of the Rams brand and franchise network and added that Rams franchise will a separate business. Westpac has also retained Greg Kolivos as chief executive of Rams. In a separate statement, Westpac announced that, following the completion of the restructuring, Rams will retain the existing loan book, which as at August 31, 2007, was A$14.5 billion.

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