NAB QUARTERLY CONSUMER BEHAVIOUR SURVEY Q4 2017

NAB QUARTERLY CONSUMER BEHAVIOUR SURVEY Q4 2017 INSIGHTS INTO THE MINDSET OF AUSTRALIAN CONSUMERS ANXIETIES AROUND FUTURE SPENDING AND SAVINGS PLANS, HOUSEHOLD FINANCES, THE ECONOMY, FINANCIAL CONCERNS & HOW THESE ARE IMPACTING SPENDING BEHAVIOURS AND LEVELS OF FINANCIAL HARDSHIP. NAB Behavioural & Industry Economics Embargoed until 11.30 am, 7 February 2018 Consumer anxiety was largely unchanged in Q4 at near survey lows. Consumers were also a little less concerned about their current household financial position. That said, the cost of living is still weighing most heavily on them, highlighting the disconnect between low levels of economy-wide inflation and consumer focussed costs. How much more money would help? On average, consumers believe an extra $207 a week per household. How consumers feel doesn t necessarily correlate with how they spend. But in Q4, lower consumer anxiety and reduced concerns over household finances does seem to have helped drive more positive spending behaviours - more consumers spent on essentials (particularly utilities), but fewer also cut back on non-essentials. Compared to a year ago, far fewer consumers are cutting back on things such as travel, eating out and entertainment. Being unable to pay a bill (particularly utilities) continues to have by far the biggest impact on the current financial position of those households most concerned about their position. Our ability to finance retirement remains our greatest money related fear, followed by providing for our family s future and raising $2,000 for an emergency. Looking beyond financial concern to actual hardship, more consumers faced some form of financial stress or hardship during the quarter, and once again being unable to pay a bill (particularly utilities) caused the most stress. Consumer anxiety unchanged at near survey lows, cost of living still biggest issue 80 NAB CONSUMER ANXIETY INDEX: COMPONENTS 100 = "extreme" anxiety Consumers believe an extra $207 per week would help ease their cost of living pressures $300 EXTRA MONEY NEEDED PER WEEK TO ALLEVIATE ANY COST OF LIVING PRESSURES ($) 70 60 $250 $200 $150 $207 $221 $214 $210 $199 $176 $214 $201 $186 $239 $220 $194 $193 $183 $213 $201 $100 $132 50 $50 40 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Consumer Anxiety Health Cost of Living Q3 2014 Q4 2014 Q1 2015 Q2 2015 More spending on essentials (e.g. utilities), but fewer cutting back on non-essentials (e.g entertainment) Savings, super, investments Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Job Security Ability to Fund Retirement Government Policy CHANGES IN SPENDING BEHAVIOURS (Y/Y) (NET BALANCE) Utilities Medical expenses Transport Paying off debt Groceries Home improvements Children Travel Use of credit Personal goods Charitable donations Major HH items Eating out Entertainment Fewer consumers are spending on... More consumers are spending on... -30-20 -10 0 10 20 30 Q4 2017 Q4'17 Q4'16 $0 Overall NSW/ACT WA VIC QLD SA/NT TAS Capital City But around 2 in 5 consumers have experienced some form of financial hardship or stress 70% 60% 50% 40% 30% 20% 10% 0% NUMBER OF CONSUMERS THAT HAVE EXPERIENCED FINANCIAL STRESS OR HARDSHIP IN LAST 3 MONTHS Regional City 54% 38% 31% 35% 39% Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Rural Town/Bush Earning $100,000+ Earning $75-100,000 Earning $35-50,000 Earning $50-75,000 Earning <$35,000 Female 53% 49% 48% 43% 35% 30% 27% All Women Men 18-29 30-49 50+ <$35,000 p.a $100,000 p.a. Male Date February 2018 Author NAB Behavioural & Industry Economics National Australia Bank Limited ABN 12 004 044 937 AFSL and Australian Credit Licence 230686 1

EXECUTIVE SUMMARY Consumer Anxiety Concerns over jobs, health, retirement, cost of living & government policy impacting spending/savings NAB s Australian Consumer Anxiety Index (a measure of how anxious consumers are that their spending/savings will be impacted by jobs, health, retirement, government policy and the cost of living), was basically unchanged in Q4 2017 at near survey low levels. Job security caused the least stress, consistent with a strongly improving labour market. But the cost of living is still weighing most heavily on consumers - almost 1 in 4 continue to report high levels of concern in Q4. Money - How much extra money would ease household cost of living pressures? On average, consumers need an extra $207 a week - or $10,764 per year (just over 13% of full-time adult average annual ordinary time earnings). But this varied according to where we live, income, gender and family status. It ranged from $221 in NSW/ACT to $132 in TAS and from $214 in capital cities to $186 in rural areas. Consumers with children need $258 and those without $191. Household Spending - How are these factors impacting household spending behaviours? Relatively low levels of consumer concerns appear to be supporting more positive (but still conservative) household spending behaviours. More consumers again increased their spending on essentials (particularly on utilities, home improvements, transport and groceries). But, there were more encouraging signs when it came to non-essential spending with a further reduction in the number of consumers cutting back over the quarter in nearly all spending categories. Economy - How concerned are consumers about the general economic situation? Consumers remain only moderately concerned about the general economic situation in Australia and its impact on their future spending and savings plans. However, there are some important differences by state, income and age. WA replaced a much more optimistic SA/NT as the most concerned state. The economy was also a far bigger concern for low income earners and over 50s. Household Finances - How concerned are consumers about their current household financial position? Consumers were a little less concerned about their household financial position in Q4. Women worried more than men and 30-49 year olds were the most concerned by age. The gap between high and low income earners narrowed, but remains large. Drivers - What factors are most impacting the financial position of highly concerned households? Almost 1 in 2 consumers who were extremely concerned about their current financial position said their utility bills had the biggest impact on their financial position. And it impacted significantly more people than the next factor- their grocery bills (around 1 in 4 people). Fears - What are consumers most worried about in relation to their current household financial position? Consumers still identify their ability to finance retirement as their single biggest concern, followed by their ability to provide for their family s future and raise $2,000 for an emergency. However, their level of concern increased most in regards to their personal loan repayments, medical bills and healthcare, food and basic necessities and their children s education. Financial Hardship - How prevalent is financial stress or hardship and what are the most common causes? Slightly more people experienced some financial stress or hardship in Q4 - around 2 in 5. Low income earners were hardest hit (over 1 in 2), with almost 1 in 2 young (18-29) and middle-aged (30-49) people also impacted. Being unable to pay a bill was the most common cause (over 1 in 5). Not having enough for food and basic necessities was next (1 in 3 low income earners). 2

NAB CONSUMER ANXIETY INDEX (100 = extremely concerned) Q4 2016 Q3 2017 Q4 2017 Overall Index 58.7 56.2 56.3 - Job security 46.7 42.2 42.5 - Health 56.8 55.2 55.2 - Ability to fund retirement 62.3 57.9 58.7 - Cost of living 64.8 64.0 63.8 - Government policy 62.8 61.8 61.5 CURRENT HOUSEHOLD FINANCIAL POSITION (100 = extremely concerned) Q4 2016 Q3 2017 Q4 2017 63.4 59.3 59.7 CONCERN RELATING TO THE HOUSEHOLD FINANCIAL POSITION OF CONSUMERS (100 = extremely concerned) Q4 2016 Q3 2017 Q4 2017 Medical bills/healthcare 52 41 45 Mortgage, rent, housing costs 45 38 41 Credit card repayments 38 31 34 Personal loan repayments 40 32 36 Children's education 42 34 37 Food/basic necessities 40 36 39 Monthly household bills 44 40 43 Non-essentials (holidays, eating out) 44 41 45 Raising $2,000 in emergency 50 46 49 Financing retirement 58 53 56 Providing for family's future 54 48 51 HOUSEHOLD SPENDING BEHAVIOURS (net balance - spending more/spending less) Q4 2016 Q3 2017 Q4 2017 Non-essential spending -21-14 -13 Essential spending -1 9 10 Financial spending -3-3 -3 Overall Spending Behaviours -13-5 -4 HOUSEHOLD SPENDING BEHAVIOURS - SPENDING CATEGORY (net balance - spending more/spending less) Q4 2016 Q3 2017 Q4 2017 Travel -16-9 -9 Eating out (coffee, take-away, restaurants, etc.) -26-20 -18 Entertainment (movies, sports, concerts, etc.) -27-20 -19 Groceries (food, alcohol etc.) -4 5 6 Home improvements and maintenance -14-2 0 Major household items (appliances, furniture etc.) -24-18 -17 Utilities (electricity, gas, phone, etc.) 2 23 22 Personal goods (clothes, toiletries, sports, pets, etc.) -20-15 -13 Medical expenses (doctors, pharmacy, optical etc.) 3 11 11 Transport (car running costs and public transport) -2 8 11 Children (school fees, childcare, activities etc.) -4-1 -1 Paying off debt 6 7 7 Use of credit -10-13 -11 Savings, investments and super contributions -4-3 -4 Charitable donations -22-18 -16 3

PART 1: CONSUMER ANXIETY How concerned are consumers that their spending and savings will be impacted by their job security, health, retirement, cost of living and government policy? NAB s Consumer Anxiety Index - which measures concerns about future spending and savings plans arising from job security, health, retirement, cost of living and government polices - was basically unchanged in Q4 2017 at near survey low levels. The overall index increased marginally to 56.3 points in Q4 2017 (down from 56.2 points in Q3 2017 and 58.7 points at the same time last year). Overall consumer anxiety remains well below its series average (60.3 points). There was also little movement in the components of the index. Although Australian consumers were slightly more anxious in regards to their ability to fund their retirement (up 0.8 to 58.7 points) and their job security (up 0.3 to 42.5 points), this was largely offset by small falls in anxiety relating to government policy (down 0.3 to 61.5 points) and cost of living (down 0.2 to 63.8 points). Anxiety stemming from health was unchanged (55.2 points). The cost of living is still weighing most heavily on consumers, and it continues to highlight a disconnect between low levels of economy-wide inflation and consumer focussed costs. Almost 1 in 4 (24%) consumers reported high levels of concern over the cost of living during the quarter. Government policy continues to be the next biggest driver of overall consumer stress, and also of high concern for almost 1 in 4 (23%) consumers. In contrast, job security caused the least stress - an outcome consistent with a strongly improving labour market which is driving the unemployment rate down. Consequently, around 7 in 10 (68%) consumers reported low or very low levels of anxiety over their job security in Q4 2017 and only 14% high anxiety. In line with an uptick in concern over retirement funding in Q4, 22% of consumers reported high levels of stress, up from 20% in the previous quarter. But when it came to health, around 55% reported low or very low anxiety, and only 15% high anxiety. 68 66 64 62 60 58 56 54 80 70 60 50 40 NAB CONSUMER ANXIETY INDEX series high (Q2 2014) average Consumer Anxiety series low (Q1 2017) Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 NAB CONSUMER ANXIETY INDEX: COMPONENTS 100 = "extreme" anxiety Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Consumer Anxiety Job Security Health Ability to Fund Retirement Cost of Living Government Policy 4

Across all consumer groups, anxiety was highest for Australians earning less than $35,000 p.a. (61.0 points), divorced people (59.5 points), men aged 30-49 (59.3 points), labourers (58.9 points) and living in WA (58.9 points). It was lowest in TAS (45.5 points), for widows (49.9 points), those earning over $100,000 p.a. (52.9 points), men over 50 (53.1 points) and professionals (53.2 points). Among key groups, anxiety increased most and was highest for consumers living in WA (58.9 points) in Q4 2017. This reflected a big jump in anxiety about job security, where their concerns were also highest of all states by some margin. Consumers living in QLD and VIC reported marginally higher anxiety in the quarter, but anxiety fell sharply in TAS and SA/NT, with both states reporting lower anxiety over all components, particularly about job security in TAS and retirement funding and health in SA/NT. Anxiety continues to be slightly higher for women (56.6 points) than men (56.1 points). Women reported higher concerns about their ability to fund their retirement, cost of living and health, but men worried more about job security and government policy. Middle-aged men (30-49) reported the highest anxiety (59.3 points) by age and gender, followed by middle-aged women (57.3 points). Higher anxiety in both these groups was most evident in relation to their cost of living, ability to fund retirement and job security (for men). In the over 50 group, men were far less worried about their ability to fund their retirement than women. Young women (18-29) also reported noticeably higher anxiety around retirement funding than young men. By income, we continue to see a very strong relationship between earnings and anxiety. Anxiety was again lowest in the highest income group (52.9 points) and highest in the lowest income group (61.0 points). Low income earners also continue to have highest levels of stress for all components of the anxiety index, except job security. Elsewhere, consumers in capital cities were the most anxious by region (56.8 points), especially around job security. Consumers with children (58.5 points) also reported much higher levels of anxiety than those without (55.0 points), particularly in relation to their job security, cost of living and retirement funding. ALL CONSUMERS WA QLD VIC NSW/ACT SA/NT TAS Capital city Regional city Rural town / bush earning <$35,000 $35-50,000 $50-75,000 $75-100,000 over $100,000 Women Men aged 30-49 aged over 50 aged 18-29 Men (30-49) Women (30-49) Women (50+) Women (18-29) Men (18-29) Men (50+) Divorced Single Married Defacto Widowed Have children No children H/hold size (three+) H/hold size (one) H/hold size (two) Vocational High school leaver Bachelor / post grad Diploma High school Part time worker Not employed Full time worker Labourer Sales / clerical Other (i.e. self emp) Technical Professional NAB CONSUMER ANXIETY INDEX: ALL GROUPS 45.5 49.9 52.9 53.5 54.4 53.7 53.1 53.2 54.8 54.0 57.0 55.9 54.8 54.4 56.8 55.5 55.2 55.0 56.3 57.3 56.8 56.0 57.2 57.0 56.1 56.6 56.1 57.3 56.3 56.2 58.4 57.5 56.4 55.2 54.6 56.4 55.5 55.4 58.3 57.9 58.9 58.5 59.3 59.5 58.9 57.4 57.1 57.1 40 45 50 55 60 65 61.0 5

How much extra money would ease household cost of living pressures? In order to gain a better understanding of their household financial position, we asked Australian consumers to tell us for the first time how much extra money per week it would take to alleviate any cost of living pressures they are facing. On average, they said they would need an extra $207 a week, or an extra $10,764 per year - equivalent to just over 13% of full-time adult average annual ordinary time earnings (extrapolated from average weekly earnings). But this amount varied considerably according to where we live - from $221 in NSW/ACT to just $132 in TAS and from $214 in capital cities to $186 in rural towns and the bush likely reflecting relatively higher costs of living in capital cities. There was also a clear relationship with income, with the amount needed to alleviate cost of living pressures rising as incomes grew from $183 for those earning less than $35,000 per annum to $239 for those earning more than $100,000. By age, the amount required was highest for 30-49 year olds ($249) and lowest for over 50s ($166). By gender, women ($213) said they needed more than men ($201) - and in all age groups but with a particularly large gap evident between young women ($237) and young men ($198). Among some other key observations, having children was clearly a bigger drain on household financial positions. Consumers with children said they required an additional $258 per week compared to just $191 for consumers that didn t have children. Moreover, consumers with children ($258), along with self-employed workers ($257), had the highest requirements of all demographic groups. Widows ($123) and consumers living in Tasmania ($132) had the lowest. $300 EXTRA MONEY NEEDED PER WEEK TO ALLEVIATE ANY COST OF LIVING PRESSURES ($) $250 $200 $150 $207 $221 $214 $210 $199 $176 $214 $201 $186 $239 $220 $194 $193 $183 $213 $201 $253 $244 $237 $198 $169 $164 $249 $217 $166 $241 $214 $200 $165 $258 $191 $241 $184 $174 $223 $214 $196 $196 $180 $233 $208 $180 $257 $232 $219 $213 $213 $100 $132 $123 $50 $0 Overall NSW/ACT WA VIC QLD SA/NT TAS Capital City Regional City Rural Town/Bush Earning $100,000+ Earning $75-100,000 Earning $35-50,000 Earning $50-75,000 Earning <$35,000 Female Male Women (30-49) Men (30-49) Women (18-29) Men (18-29) Women (50+) Men (50+) Age 30-49 Age 18-29 Age 50+ Defacto Married Single Divorced Widowed Have Children No Children Hosuehold Size (3+) Hosuehold Size (2) Household Size (1) Bachelor/PostGrad Diploma Vocational High school High School Leaver Employed Full Time Employed Part Time Not Employed Other (Self-Employed) Professional Technical Labourer Sales/Clerical 6

PART 2: HOUSEHOLD SPENDING BEHAVIOURS How has the household financial position of Australian consumers impacted their overall spending behaviours? 20 spending more HOUSEHOLD SPENDING BEHAVIOURS net balance How consumers feel doesn t necessarily correlate with how they spend. But in Q4, relatively low levels of consumer anxiety and lower concerns about current household financial positions did seem to help drive more positive spending behaviours in Australian households. NAB s measure of household spending behaviours (which counts the number of consumers that spent more on a range of items against those that spent less on these items) continued to paint a picture of a conservative consumer - but also one that has become increasingly less conservative since late-2016. NAB s overall spending indicator improved to -4 in Q4 2017 (from -5 points in the previous quarter and -13 during the same period in the last year), indicating that the number of consumers that cut back their overall spending still out-numbered those that increased their spending. More consumers again increased their spending on essentials over the quarter (+9 to +10). But there were also further encouraging signs when it came to non-essential spending, with a further reduction in the overall number of consumers cutting back over the quarter (from -14 to -13). Financial spending behaviours (consisting of paying off debt, using credit cards and savings, investments and superannuation were largely unchanged over the quarter. But when compared to the same period one year earlier (Q4 2016), we noted large increases in the number of consumers spending on essentials. This was most obvious in the net number of consumers spending more on utilities (from +2 to +22), home improvements (-14 to 0), transport (from -2 to +11) and groceries (-4 to +6). The number of consumers that cut back their spending on non-essentials again out-weighed those who spent more. However, noticeably fewer consumers spent less compared to the same period a year ago, particularly when it came to entertainment (from -27 to -19), major household items (-24 to -17) and travel (from -16 to -9). When it came to financial spending, behaviours were basically unchanged over the year. 10 0-10 -20-30 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Non-essentials Essentials Financial Behaviour Spending Behaviour Utilities Medical expenses Transport Paying off debt Groceries Home improvements Children Savings, super, investments Travel Use of credit Personal goods Charitable donations Major HH items Eating out Entertainment Savings, super, investments CHANGES IN SPENDING BEHAVIOURS (Q/Q) (NET BALANCE) Fewer consumers are spending on... More consumers are spending on... Q4'17 Q3'17-30 -20-10 0 10 20 30 CHANGES IN SPENDING BEHAVIOURS (Y/Y) (NET BALANCE) Utilities Medical expenses Transport Paying off debt Groceries Home improvements Children Travel Use of credit Personal goods Charitable donations Major HH items Eating out Entertainment Fewer consumers are spending on... More consumers are spending on... Q4'17 Q4'16-30 -20-10 0 10 20 30 7

How concerned are consumers about the general economic situation in Australia? Consumers remain only moderately concerned about the general economic situation in Australia and its impact on their future spending and savings plans. Overall, they scored 61.0 points in Q4 2017 (where 100 is extremely concerned), down slightly from 61.3 points in Q3 2017. This improvement was in line with the latest GDP data that confirmed a decent (but volatile) growth momentum in the first three quarters of 2017. However, there are some important differences in key groups. By state, WA (63.2 points) replaced a much more optimistic SA/NT (58.9 points) for the highest concern about the economy. Consumers in TAS (59.5 points) were the least worried and much less so than in Q3 2017. There also continues to be a very clear relationship between the economy and income - it is still a far bigger concern in the lowest income group (66.1 points) and lowest for the highest income earners (56.2 points). By age, the economy caused the most concern for over 50s (65.3 points). It was of least concern to 18-29 year olds (56.2 points) who also had the lowest levels of consumer anxiety by age group. Despite improving over the quarter, men (61.3 points) were somewhat more anxious about the general economic situation in Australia than women (60.7 points). 68.0 66.0 64.0 62.0 60.0 58.0 56.0 54.0 52.0 50.0 61.3 62.1 62.0 60.4 61.4 62.3 57.6 66.1 63.1 61.0 63.2 62.0 61.3 60.5 58.9 53.0 66.1 63.1 61.0 59.3 56.2 65.3 58.7 56.3 61.3 60.7 Overall HOW CONCERNED ARE CONSUMERS ABOUT THE GENERAL ECONOMIC SITUATION IN AUSTRALIA? (0 = not at all; 100 = completely) WA QLD VIC NSW/ACT SA/NT TAS Earn <$35,000 Earn $35-50,000 61.3 Earn $50-75,000 58.8 Earn $75-100,000 57.2 Earn $100,000+ 65.0 Age 50+ Q4 2017 Q3 2017 59.5 Age 30-49 57.1 Age 18-29 61.5 61.2 Men Women 8

PART 3: HOUSEHOLD FINANCIAL POSITION & DRIVERS OF FINANCIAL STRESS How concerned are consumers about their current household financial position? Australians were less concerned about their household financial position in Q4 2017. When asked to rate their level of concern relating to their future spending and savings plans arising from their current financial position, they scored 59.7 points out of 100 (100 is extremely concerned), down from 59.3 points in Q3 2017. The overall result continues to suggest Australian consumers are experiencing moderate levels of concern about their household financial position. However, the overall result also hides some important differences between men and women, by age and by income. By gender, women (61.4 points) continue to worry more about their household financial position than men (57.9 points) in Q4 2017. By age, concerns increased a little for over 50s (56.7 points), but they remain by far the least concerned age group. Men over 50 (53.9 points) were however far less concerned than women over 50 (59.2 points). The level of concern among 18-29 year olds fell a little in Q4 (59.5 points), but young men (57.6 points) were far less concerned than young women (61.5 points). Concerns about their current household financial position among middle-aged Australians also rose (63.3 points), but were broadly the same for men and women. 75.0 CONCERN OVER HOUSEHOLD FINANCIAL POSITION: GENDER (0 = "not at all" concerned; 100 = "extremely" concerned) 75.0 CONCERN OVER HOUSEHOLD FINANCIAL POSITION: AGE (0 = "not at all" concerned; 100 = "extremely" concerned) 70.0 70.0 65.0 65.0 63.3 60.0 61.4 59.7 57.9 60.0 59.7 59.5 56.7 55.0 55.0 50.0 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 50.0 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Overall Women Men Overall 18-29 30-49 50+ 75.0 70.0 65.0 60.0 55.0 50.0 CONCERN OVER HOUSEHOLD FINANCIAL POSITION: INCOME (0 = "not at all" concerned; 100 = "extremely" concerned) Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 66.8 62.1 59.7 58.9 58.9 Overall <$35,000 $35-50,000 $50-75,000 $75-100,000 $100,000+ 55.3 NABs survey also found that the level of concern tends to fall as household income levels grow. Despite rising over the quarter, concerns were lowest among consumers earning over $100,000 p.a. (55.3 points) - and by some margin. Concerns also increased in the $75-100,000 p.a. income group, but fell in the $50-75,000 p.a. group. Consequently, these groups reported similar levels of concern in the quarter (58.9 points). Concerns also increased in the $35-50,000 p.a. income group (62.1 points), but moderated a little in the lowest income group (66.8 points). As a result, the gap between the highest income group and the lowest income group narrowed during Q4 2017, but it is still quite significant. 9

What are consumers most worried about in relation to their current household financial position? We also asked consumers to tell us what they worried about most in relation to their current household financial position Overall, consumers continue to identify their ability to finance retirement as the biggest single worry, followed by their ability to provide for their family s future and raise $2,000 for an emergency. However, their level of concern increased most during the quarter in regards to their personal loan repayments, medical bills and healthcare, food and basic necessities and their children s education. Women expressed higher levels of concern than men for all drivers - and significantly higher levels of concern were noted about medical bills and healthcare, monthly household bills, the ability to fund their retirement and being unable to provide for their family s future. By age, over 50s worried the least about all key drivers. Middle-aged Australians (30-49 years old) were noticeably more concerned about being able to finance their retirement, not being able to meet the cost of medical and healthcare bills and not being able to provide for their family s future. Young Australians were however the most concerned when it came to not being able to meet their credit card and personal loan repayments, not having enough for non-essentials and being able to raise $2,000 for an emergency. Australian consumers earning less than $35,000 p.a. expressed greater levels of concern over all drivers than any other income group in Q4 2017, except for having enough to pay for their children s education. Low income earners were particularly concerned about being unable to fund their retirement and their ability to $2,000 for an emergency. 70 60 50 40 30 20 70 60 50 40 30 20 58.5 52.6 55.7 Financing retirement WHAT WORRIES CONSUMERS MOST ABOUT THEIR CURRENT HOUSEHOLD FINANCIAL POSITION 100 = "extremely" concerned 58.2 Financing retirement 53.2 54.4 48.1 51.2 Providing for family's future 53.6 50.0 46.1 49.4 53.6 Raising $2,000 in an emergency 43.9 41.0 45.0 Non-essentials (holidays, eating out) 46.6 51.9 46.3 41.1 44.6 Medical bills/healthcare 44.1 40.1 43.3 46.0 Monthly household bills 45.0 37.9 40.6 42.5 Mortgage, rent, housing costs Q4 2016 Q3 2017 Q4 2017 39.9 35.8 39.3 41.1 Food/basic necessities 42.3 38.2 33.6 37.1 WHAT WORRIES CONSUMERS MOST ABOUT THEIR CURRENT HOUSEHOLD FINANCIAL POSITION : GENDER - Q4 2017 100 = "extremely" concerned Providing for family's future 48.9 Raising $2,000 in an emergency 45.1 Non-essentials (holidays, eating out) 43.3 Medical bills/healthcare 42.9 Monthly household bills 40.6 Mortgage, rent, housing costs 38.6 Women Food/basic necessities 37.4 Children's education Children's education 36.1 39.7 31.8 36.0 37.1 Personal loan repayments Personal loan repayments Men 34.9 37.6 30.6 33.8 34.7 Credit card repayments Credit card repayments 33.0 10

What factors most impact the financial position of highly concerned households? Australian consumers who said they were extremely concerned about their current financial position were also asked to tell us what issues in particular were having the biggest impact on their current financial position. Overall, by far the biggest impact came from utility bills according to almost 1 in 2 people (47%), and it impacted significantly more Australians than the next biggest issue - their grocery bills (around 1 in 4 people or 27%). Other issues that impacted the current financial position of a large number of Australians - around 1 in 5 - included low pensions and/or other benefits (22%) and insufficient savings (22%). Low wages (17%), rental payments (16%), medical expenses (15%) and mortgage repayments on their primary residence (14%) were also problematic for a relatively large number of people. Things that impacted household financial positions of average Australians the least included mortgage repayments on investment properties (2%), major household items (3%), the state of the global economy (3%), home improvements and maintenance (4%), poor investment returns (5%), low interest rates (6%) and the absence of a pay rise (7%). 50% 40% 48% 47% FACTORS IMPACTING CURRENT FINANCIAL POSITION OF "HIGHLY" CONCERNED HOUSEHOLDS* * multiple responses allowed 30% 20% 10% 0% Utility bills 25% 27% Grocery bills 23% 22% Pension / other benefits too low 23% 22% Insufficient savings 16% 17% Wages too low 16% 16% Rental payments 14% 15% Medical expenses 13% 14% Mortgage repayments (home) 14% 13% Not enough work 12% 12% State of Australian economy 12% 12% Level of personal household debt 11% 10% Insufficient superannuation 10% 10% Transport expenses 8% 9% Children expenses 7% 7% Absence of a pay rise 5% 6% Low interest rates 4% 5% Poor investment returns 5% 4% Home improvements & maintenance 3% 3% Other 4% 3% State of global economy 2% 3% Major household items 2% 2% Mortgage repayments (investment property) 1% 1% Don't know For the most part, women and men reported broadly similar results when identifying what impacts their financial position most, although somewhat more women (50%) were impacted by utility bills than men (44%). Differences were much more apparent by age. Young Australians (18-29) were noticeably less impacted by utility bills (27%) compared to over 50s (61%). But low wages (28%) and transport expenses (16%) impacted their financial position more than any other age group. In contrast, low pensions and other benefits played a much bigger role for over 50s (39%), while expenses related to children (e.g. school fees, activities etc.) played a far bigger role for 30-49 year olds (18%). Utility bills, grocery bills and low pensions and benefits impacted more low income earners than those on high incomes. Rental payments and not having enough work were also a much bigger issue for this group. More high income earners were however impacted by home mortgage repayments and the state of the Australian economy. 11

FACTORS IMPACTING CURRENT FINANCIAL POSITION OF HIGHLY CONCERNED HOUSEHOLDS: BY GENDER, AGE & HIGH/LOW INCOME Overall Women Men 18-29 30-49 50+ Low Income Utility bills 47% 50% 44% 27% 43% 61% 52% 49% Grocery bills 27% 28% 25% 24% 25% 29% 36% 21% Pension / other benefits too low 22% 23% 21% 8% 12% 39% 44% 34% Insufficient savings 22% 21% 23% 28% 25% 16% 17% 19% Wages too low 17% 16% 18% 28% 23% 6% 10% 14% Rental payments 16% 17% 15% 22% 20% 9% 18% 8% Medical expenses 15% 16% 13% 9% 13% 19% 14% 18% Mortgage repayments (home) 14% 15% 12% 14% 19% 9% 4% 13% Not enough work 13% 15% 12% 22% 14% 8% 18% 10% State of Australian economy 12% 10% 14% 11% 9% 15% 8% 17% Level of personal household debt 12% 12% 11% 15% 13% 8% 6% 5% Insufficient superannuation 10% 10% 10% 3% 7% 18% 11% 9% Transport expenses 10% 9% 12% 16% 11% 6% 10% 6% Children expenses 9% 10% 8% 7% 18% 2% 3% 3% Absence of a pay rise 7% 6% 8% 8% 8% 5% 4% 8% Low interest rates 6% 4% 8% 4% 2% 10% 7% 9% Poor investment returns 5% 4% 6% 3% 3% 8% 5% 6% Home improvements & maintenance 4% 4% 5% 3% 3% 6% 5% 2% Other 3% 4% 3% 4% 3% 3% 2% 4% State of global economy 3% 2% 4% 3% 3% 3% 2% 1% Major household items 3% 3% 4% 5% 3% 2% 2% 3% Mortgage repayments (invest. property) 2% 2% 2% 1% 3% 1% 1% 1% TOP 5 1 2 3 4 5 High Income 12

PART 4: FINANCIAL STRESS & HARDSHIP How prevalent is financial stress or hardship, and what are the most common causes of stress or hardship people face? Around 2 in 5 (39%) Australians said they experienced some form of financial stress or hardship in the past 3 months, up from 35% in Q3 2017. And the number of Australian consumers that experienced financial stress or hardship increased in all key demographic groups. 70% NUMBER OF CONSUMERS THAT HAVE EXPERIENCED FINANCIAL STRESS OR HARDSHIP IN LAST 3 MONTHS The lowest income earners (less than $35,000 p.a.) were hardest hit, with over 1 in 2 (53%) experiencing some form of financial stress or hardship, up from 49% in the previous quarter. This compared to just 30% of Australians in the highest income group. By age, around 1 in 2 young (18-29) and middle-aged (30-49) Australians were also impacted, compared to just over 1 in 4 (27%) over 50s (20%). More women (43%) than men (35%) said they had experienced some form of financial stress or hardship in Q4 2017. Financial stress was also more prevalent among women in all age groups. Being unable to pay a bill was the most frequently cited cause of stress or hardship - for over 1 in 5 (21%) Australians overall, but for 30% of the lowest income earning Australians, 26% of 30-49 year olds and 24% of women. Not having enough for food and basic necessities was the next biggest cause of financial stress or hardship - affecting 18% in total, but almost 1 in 3 (31%) in the lowest income earning group. 60% 50% 40% 30% 20% 10% 0% 54% 38% 31% 35% 39% Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 53% 49% 48% All Women Men 18-29 30-49 50+ <$35,000 p.a $100,000 p.a. 43% 35% 30% 27% 70% TYPE OF FINANCIAL STRESS OR HARDSHIP EXPERIENCED IN THE LAST 3 MONTHS 60% 50% 61% 40% 30% 20% 10% 0% 21% 18% 13% 9% 9% 7% 5% NO FINANCIAL STRESS Unable to pay a bill Not enough for food & basic necessities Unable to pay medica/health bills Unable to pay personal loans Unavble to pay credit card Unable to pay rent Unable to pay mortgage 13

CONTACT THE AUTHORS Alan Oster Group Chief Economist Alan.Oster@nab.com.au +613 8634 2927 Dean Pearson Head of Behavioural & Industry Economics Dean.Pearson@nab.com.au +613 8634 2331 Robert De Iure Senior Economist - Behavioural & Industry Economics Robert.De.Iure@nab.com.au +613 8634 4611 Brien McDonald Senior Economist - Behavioural & Industry Economics Brien.McDonald@nab.com.au +613 8634 3837 Steven Wu Economist - Behavioural & Industry Economics Steven.A.Wu@nab.com.au +(613) 9208 2929 Important Notice This document has been prepared by National Australia Bank Limited ABN 12 004 044 937 AFSL 230686 ("NAB"). Any advice contained in this document has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice in this document, NAB recommends that you consider whether the advice is appropriate for your circumstances. NAB recommends that you obtain and consider the relevant Product Disclosure Statement or other disclosure document, before making any decision about a product including whether to acquire or to continue to hold it. Please click here to view our disclaimer and terms of use. 14