Older men who have graduated university are the most likely people to be economically literate, according to an Australian-first survey by the Reserve Bank.
Many Australians do not know the RBA’s inflation target, that business investment would usually increase total spending in the economy or that an interest rate cut would allow people to save less and borrow more — while only half correctly identified that the RBA would lower the cash rate if there was a recession and a period of low inflation.
The findings of the central bank’s research, published in the most recent edition of the RBA Bulletin, showed little difference in the answers of those with a mortgage and those without.
But those who did have one were more likely to correctly answer the questions about the bank itself and the setting of interest rates.
The research follows similar work the bank conducted last year that showed the study of economics in high schools is falling away at a dramatic pace, particularly for girls, while the number of schools even offering the subject has also decreased.
While older men performed better on the test — suggesting a higher degree of economic literacy — the differences were marginal.
Overall, men correctly answered an average of 3.1 questions in the six-question test, compared to 2.8 for women. Those on the top 50 per cent of incomes averaged a score of three compared to 2.8 for those on lower incomes.
The largest score differential was on age and education. For those with a university degree, the average score was 3.1 compared to 2.6 for those without. People aged 18-24 also on average scored 2.6 compared to the over 55s, who scored 3.2.
Researcher Madeleine McCowage said economically literate people made more informed economic choices, could better understand the world around them and influence government actions and public discourse.
“These findings speak to the importance of simple and targeted communication by the bank and other policymakers to support the understanding of economic concepts across the community,” she said.
The RBA review earlier this year urged an overhaul in how the bank communicates with people, including more frequently with the population at large, rather than solely at economic gatherings or conferences.
From next year, new governor Michele Bullock will front a press conference after each interest rate decision, which is hoped will better help people understand what the bank is trying to achieve.
The research is thought to be the most comprehensive on the state of economic literacy among Australian adults, and the RBA plans to build on it with further analysis to come.