Four in 10 Australians are experiencing some form of financial difficulty, which is the highest number recorded by NAB's hardship survey since the early days of the COVID-19 outbreak.
The elevated December quarter results follow steady increases in reported hardship over three years.
Those experiencing hardship may be struggling to pay bills and rent, not have enough money to buy food, are falling short on mortgage or loan repayments, or don't having enough money to fund an emergency.
"Financial hardship can happen at any time, and is often the result of sickness, job loss or over-commitment," the NAB report said.
"Rapidly rising interest rates and cost of living are now also causing financial distress in more households."
Despite aggressive interest rate hikes driving up repayments for those with variable rate loans, the inability to meet mortgage repayments was the lowest contributor to the high rates of financial stress.
The survey of 2000 Australians found just one in 20 respondents were struggling to meet their home loan obligations, compared to one in five people who had missed paying a bill in the past three months.
Around one in five didn't have enough money for an emergency, and sixteen per cent were unable to afford food and basics.
The cost of living crisis was hitting rural and regional areas harder than capital cities, with Tasmanians reporting the highest rates of financial trouble of any state or territory.
