11 July 2008
Media Release
|
Listen to an audio broadcast with Damian Karmelich, D&B's Corporate Affairs Director: http://www.brr.com.au/event/47650 |
Subscribe to the Consumer Credit Expectations Survey>> |
One third of Australians expect to have higher household debt levels in three months time and a growing number of those with children expect to rely on credit cards to make ends meet according to the latest Dun & Bradstreet (D&B) Consumer Credit Expectations Survey.
The D&B survey, conducted by Newspoll* focused on Australians' expectations for credit applications, credit usage and debt performance over the September quarter.
The survey found:
- There has been a jump in the number of Australians expecting to have higher debt levels in three months time, up six percentage points on the June quarter and 14 percentage points since the question was first asked in October 2007
- Families are showing the most significant signs of problematic credit card use with 30 per cent of those with children indicating they will turn to credit cards to pay for items they otherwise couldn't afford (up from 21 per cent in the June quarter) and 10 per cent indicating they will miss a bill payment in the next three months
- Credit demand remains strong with the 18-34 age group and those with families leading applications for new credit or credit limit increases.
 |
Expectations for higher debt levels
Dun & Bradstreet CEO Christine Christian believes the turning of the credit cycle is now showing clear signs of impacting family budgets.
"Over the last four quarters we have seen fears of increased debt levels continuing to escalate across the board," said Ms Christian.
"However the latest survey reveals that a clear gap is developing between different segments of the community. The considerably increased debt levels expected by blue collar households and those with families show that high interest rates and fuel, food and energy price rises are hurting the hip pockets of some demographics more significantly than others."Debt levels:
One third (34 per cent) of respondents expect their level of household debt to be higher in three months time, up from 20 per cent in the December 2007 quarter. Blue collar households have seen the greatest increase in household debt expectations over the quarter - jumping nine percentage points to 43 per cent. Those aged 50 and over also recorded a significant rise in debt expectations, with 37 per cent now anticipating household debt will be higher by September (up from 31 per cent in the June quarter).
Credit card use:
When examining expectations for credit card use, one in four Australians (23 per cent) expect to use their credit card to cover purchases they otherwise couldn't afford in the next three months. This figure jumps to 30 per cent for families with children and those in the 35-49 age group, nine and seven percentage point jumps respectively for these two groups. Meanwhile 29 per cent of 18-34 year olds anticipate they will turn to credit to cover otherwise unaffordable expenses in the September quarter.
Missed payments:
Ten per cent of families anticipate they will miss a bill repayment in the coming quarter and the same number of 18-34 year olds share this expectation. Australians earning less than $70,000 also have significant expectations for missed payments with nine per cent anticipating they will skip a bill in the September quarter.
Credit demand:
Credit demand expectations provide further evidence that certain demographics are being forced to turn to credit to make ends meet, with the number of people intending to apply for a new credit facility or a credit limit increase highest in the younger age groups and for those with children. Twenty four per cent of 18-34 year olds and 18 per cent of Australian households with children expect to apply for some form of credit facility in the coming three months - the national average is 15 per cent.
 |
Credit applications
White collar households have higher expectations than blue collar households for credit applications or increases in the September quarter. Seventeen per cent of white collar households expect to make an application, while this figure drops four percentage points for blue collar households.
However in a sign consumers are concerned their credit commitments may make it harder to access credit in the future, there has been a dramatic jump in the number of Australians ordering copies of their own credit report to check their financial health before making a new credit application. Dun & Bradstreet data reveals a 118 per cent jump in the number of consumers checking their credit file between December 2007 and April 2008.
According to Ms Christian the survey highlights that a significant proportion of the Australian community are really feeling the squeeze.
"That a substantial number of Australians have signalled they will need to use credit to get by in the coming months provides a strong warning to lenders that thorough credit checks must be conducted prior to the extension of funds to ensure consumer over indebtedness is prevented," said Ms Christian.
"It is also important that consumers - particularly young people and those with children - are careful with their finances. Both groups are showing signs of debt stress, with the potential for future trouble evident in their high expectations for credit applications."
"Expectations for missed bill payments reveal another layer of potential trouble with many people unaware of the implications of defaults on their ability to access future affordable, mainstream credit."
Payment defaults are listed on a consumers' credit file for up to seven years.
While recently released Reserve Bank of Australia data has showed a slowing in credit growth, this new data suggests there are some demographics where demand for credit remains strong. With indications that the groups seeking new or additional credit are the same demographics that anticipate missing bill payments or covering otherwise unaffordable expenses with credit, these new applications could be a concern.
In an environment where some consumers are facing high levels of indebtedness and problematic credit card use, ensuring that credit providers have the best possible information on which to base lending decisions could not be more important. The introduction of a comprehensive credit reporting system, which would allow for additional data elements to be included on credit reports, is critical to this process.
"The evidence supporting reform is overwhelming. A comprehensive credit reporting system has the potential to significantly reduce default rates and improve access to credit for under-served sections of the community," said Ms Christian.
For further information, please contact:
Danielle Woods
D&B PR Manager
02 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.
