Research reveals Australia’s financial literacy strategy “not active”

New research commissioned by the Ecstra Foundation has revealed Australia is lagging behind its global counterparts on actively implementing strategies to improve financial literacy, with its latest strategy released in 2022 found to be “not currently active”.

The report by Social Ventures Australia (SVA), International Approaches to Progressing Financial Capability, found that Australia’s National Financial Capability Strategy 2022 – while it is the country’s fourth strategy on the issue – is not just inactive, but also “not clearly defined” as of 2023 and is especially lacking in comparison to its OECD peers.

The Household, Income and Labour Dynamics in Australia (HILDA) results from 2022 show Australia’s financial literacy levels have dropped across all demographics, with 15-to-24-year-olds at the lowest, followed by those aged 25 to 34 years. The research also indicated that the number of households experiencing financial stress has increased between 2006 and 2020, with 20.7 per cent of households having cash flow problems (up from 18.5 per cent) and 18.7 per cent of households were unable to raise $2,000 in funds in a week when needed (up from 14.5 per cent). Over half of Australians surveyed (56 per cent) reported that they are only just making ends meet or are failing to do so.

“Despite the efforts of a broad range of stakeholders focused on financial capability activities, Australia’s financial literacy levels are not improving, particularly among younger people. There is a risk we could fall behind globally if action is not taken,” Caroline Stewart, CEO of Ecstra, said.

“This is particularly concerning against a backdrop of cost-of-living pressures, as Australians are navigating multiple challenges, economic inequality and the continued proliferation of financial scams.

“National strategies are complex, long term public policy projects. Given the many drivers of financial capability, the range of players involved and policy intersections, government leadership is critical for setting a clear, unified vision and roadmap.“

The research also made five key opportunity recommendations for Australia:

• Recommit to a National Strategy for financial literacy and capability – including concrete goals and targets, sustainable funding and outcomes measurement.
• Map stakeholders, initiatives and funding to better understand the financial capability ecosystem and to identify gaps and opportunities.
• Convene stakeholders to ensure collaborative action. This includes community and consumer organisations, educators, academics, peak bodies, philanthropic partners, industry and government.
• Ensure students have access to quality, evidence-based financial education in all schools across Australia.
• Continue to engage in international initiatives addressing financial capability (e.g. PISA, OECD International Network on Financial Education).

A key opportunity for Australia was also following the footsteps of other countries, such as the United States and New Zealand, that have incorporated mandatory financial literacy courses or programs into school curriculums. This comes as Australia’s OECD Programme for International Student Assessment (PISA) results in 15-year-olds have declined since 2012, with no significant improvements in the most recent assessment cycles. Australia also did not participate in the 2022 PISA financial literacy component.

“Ecstra runs the largest face to face financial literacy program offered in schools across Australia however a whole systems change approach is needed. We reiterate our call for the government to lead a national financial capability action plan that includes elevating the importance of financial education,” Stewart said.

“There are many stakeholders working on financial capability and wellbeing. This provides a strong base for championing a renewed approach to building financial capability to improve the lives of all Australians.”