22 January 2008
One in four Aussies expects higher debt levels by April
Media Release
An increasing number of Australian consumers expect to face financial difficulty with one in five turning to credit cards to cover expenses they couldn't otherwise afford and one in four expecting their debt levels to be higher in three months time, according to findings from a Newspoll survey conducted exclusively for Dun & Bradstreet (D&B).
The findings come as Dun & Bradstreet data reveals that the average dollar value of debt referred for collection in the December quarter 2007 increased by around $400 from the previous quarter to more than $1,200.
The Newspoll survey found that in the coming three months nineteen per cent of Australians plan to use their credit card to pay for items they otherwise couldn't afford. Females and those in the 18-24 age group have the greatest expectations that they will turn to their credit card to cover costs in the coming months while those over 50 are least likely to use their credit card for this purpose.
Australians with incomes between $30,000 - $70,000 also have high expectations for problematic credit card use. One in four people in this category indicated that they plan to use credit to purchase items they couldn't otherwise afford, demonstrating that consumer overindebtedness is an issue for both low and middle income earners.
For overall debt levels almost one in four (23%) Australians expect to be in more debt in three months time, with the split between males and females almost on par. Older Australians and those earning less than $30,000 are most concerned that their debt levels will increase in the coming months with 25% of those aged over 50 and 30% of low-income households believing this to be the case (refer to Figure 1.1).
Figure 1.1: Consumers expecting household debt to increase in the coming three months (by income bracket)
Examining the data by state reveals that New South Wales and West Australian consumers look set to face the greatest debt burden with 26% and 25% of consumers in these states respectively anticipating higher debt by Q2.
Signs of stress for lower-income Australians are also evident in expected repayments patterns for the next three months. When asked whether they expected to pay more than the required minimum payment off their credit card over any of the next three months, one in five people earning less than $30,000 said they didn't. That is close to double the national average.
Conversely, of those earning above $70,000, almost 80% said they intend to pay more than the minimum in each of the coming three months.
Christine Christian, Dun & Bradstreet's CEO believes the Newspoll findings reflect the impact of continued credit market turbulence and increases in interest rates and fuel prices on Australian consumers.
"The survey is showing that a number of households are expecting to be in more debt in three months time and many consumers are intending to rely on credit to cover items they otherwise couldn't afford," said Ms Christian.
"Interest rates are currently at their highest level in more than a decade, petrol prices are rising and credit is now more expensive and difficult to access due to the credit crunch. This means a higher proportion of pay packets are going towards core household expenses like mortgage repayments and fuel prices, forcing many to turn to credit cards to bridge the gap."
The Newspoll findings are supported by December quarter debt data from Dun & Bradstreet's consumer credit bureau and collections businesses. The data highlights that Australians are getting into financial difficulty at a young age and shows that while fewer older people have debt referred for collection, when it does occur it is usually for larger amounts than the rest of the population.
In particular the data reveals that:
- the 25-34 age group accounted for one third of all referred debt
- more than half of all referred debt was for values of $400 or less
- males had higher average debt values than females at around $1,500
- NSW consumers incurred larger average debt values than any other state or territory.
Men vs. women
The average value of debt referred for collection from men in the December quarter 2007 was close to $500 more than the average for females with men at around $1,500 and women just short of $1,000. Both genders increased the average value of their debt from the previous quarter with men up by close to $500 and women up by almost $300.
Debtor age
The 25-34 age group accounted for one third of all referred debt for collection in the December quarter. The 35-44 and 15-24 age groups followed, accounting for 25% and 21% of referred debt respectively (refer to Figure 1.2).
Figure 1.2: proportion of referred debt by age group
All age categories saw an increase in debt values in the December quarter as compared to the previous quarter. The 55-64 age group had the highest average debt value at more than $2000, an increase of close to $700 on the previous quarter.
State vs. state
NSW consumers incurred larger average debt values in the December quarter than any other state or territory. At more than $1,500, the average value of debt was up by $350 on the previous quarter. Victoria followed close behind also increasing its average debt value from the September quarter.
Victorian consumers accounted for the highest proportion of referred debt at close to 40%; NSW followed at around 27%.
According to Ms Christian the 2007 December quarter debt data and the Newspoll findings are a clear sign that consumers need to think very carefully before taking on any more debt and that lenders must ensure that their credit assessment processes are comprehensive.
"Credit is critical to the continued growth of the economy. However we must be mindful that for many people credit is being used to bridge the gap in household budgets which may bring some short term relief but will eventually come to an abrupt and expensive end. Identifying this danger is the responsibility of both the borrowers and lenders."
For further information, or to arrange an interview please contact:
Danielle Woods
D&B PR Manager
+612 8270 2926
About D&B
D&B is the world's leading provider of business-to-business credit, marketing and purchasing information and receivables management services. D&B manages the world's most valuable commercial database with information on more than 130 million companies.
Information is gathered in 193 countries, in 95 languages or dialects, covering 186 monetary currencies. The database is refreshed more than one million times daily as part of D&B's commitment to provide accurate, comprehensive information for its more than 150,000 customers.
The Australasian operations were bought out by the senior management group in August 2001. It was the first MBO of a wholly owned subsidiary in D&B's history worldwide.
Today Lazard Carnegie Wylie owns an approximate 90% stake in DBA and the local management team a 10% stake.
Strategies for future growth include developing DBA's commercial and consumer credit referencing business; expanding its receivables management outsourcing business; maintaining its lead in the development of unique credit and risk scoring products; and developing new products specifically tailored to the Australasian market. DBA currently employs over 500 people in Australia and New Zealand.
