As living expenses rise but wage growth remains subdued, Australians are increasingly needing to overspend and dip into their savings.

That was the key finding of ME Bank's latest "financial comfort" report, which surveyed 1,500 people about how they perceived their own financial wellbeing in the first half of 2018.

The steepest decline was observed when people were asked how confident they felt about their short-term cash savings.

The short answer appears to be "not very", as their level of confidence in that regard fell 3 per cent to 4.93 (out of 10), its lowest value in two years.

This is consistent with official figures from the Bureau of Statistics (ABS) which revealed, in the March quarter, the household savings ratio fell to 2.1 per cent — its lowest rate since December 2007.

"Clearly, this is a potential tipping point," said ME Bank's consulting economist Jeff Oughton.

"At the moment, Australians generally can dip into their savings to get by.

"However, some households may get to a point where there's no more savings to draw from.

"Currently, around a quarter (26pc) of Australian households have less than $1,000 in cash savings."

Financial stress on the rise

The report also found that households' confidence in raising money for a financial emergency continued to fall, and that the monthly savings of Australians slipped by just over 10 per cent during the first six months of the year.

Financial stress remained at high levels for low-income households.

"Over the past year, 17 per cent of households 'could not always pay their utilities bills on time', while 19 per cent 'sought financial help from family or friends' and 15 per cent 'pawned/sold something to buy necessities'," ME Bank's report noted.

The bank's latest report also found that incomes did not increase for 42 per cent of households in the last year — while 24 per cent said their incomes had fallen, and 34 per cent experienced a pay rise.

One of the worst-affected groups were young people (under 30 years of age, with no kids), who were particularly insecure about their level of savings.

Empty nesters (over 50 years old) also struggled with the adequacy of their financials.

"Many are still concerned about current finances as well as worried about their life after work, expressing an 8 per cent drop in comfort with their expected standard of living for retirement, as well as a 7 per cent fall in their 'comfort with savings'," Mr Oughton said.

Housing stress continued to be a major issue for Australians with mortgages to repay — 45 per cent of households said they were using more than 30 per cent of their disposable income to pay off their home loans over the last half-year.

Despite the gloomy report, there was a silver lining for renters.

"The good news for renters is that financial stress has lessened somewhat during the past six months, thanks to the housing market cooling and rents falling.

"While almost three-quarters (72 per cent) of renters were previously contributing over 30 per cent of their disposable income towards rent, this number dropped significantly to two-thirds (67 per cent) in the most recent survey."