The level of financial literacy in Australia declined over the four years to 2020, a new report on the country’s household economic and financial wellbeing has found.

The latest edition of the Melbourne Institute’s Household, Income and Labour Dynamics in Australia (HILDA) Survey shows that men and women, and people of all ages scored lower in a test that asked five relatively straightforward questions covering numeracy, understanding of inflation, diversification, risk and return and “money illusion”.

Men scored an average of 4 (out of five), compared with a score of 4.1 in 2016. Women scored 3.5 – down from 3.7 in 2016.

The lowest score was recorded by 15 to 24 year-olds, with an average of 2.9 – down from 3.4 in 2016. 

The highest scores were recorded by 45 to 54 year-olds and 55 to 64 year-olds. In both groups the average was 4.1 – down from 4.2 in 2016.

The survey found that immigrants from countries other than English-speaking countries have considerably lower financial literacy scores, as do Indigenous Australians.

Partnered people have higher scores and university education is strongly associated with financial literacy.

The full-time employed have higher scores than the part-time employed and unemployed. There is no evidence of association between region of residence and financial literacy.

Both higher household income and higher household wealth are associated with higher levels of financial literacy.

“This finding does not necessarily mean poor economic outcomes are causing low financial literacy. Low financial literacy could in fact be a cause of poor economic outcomes,” the report said.

As to the decline in recent years, the report said: “The unavoidable conclusion is that no progress has been made on improving the financial literacy of the Australian population since 2016.”

The importance of financial literacy is that it correlates with financial wellbeing. The survey found that financial wellbeing is higher among people with higher levels of financial literacy.