8 April 2008
Signs of severe debt stress for younger Australians
Media Release
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To listen to an audio broadcast with Christine Christian, D&B's CEO click on the following link: http://www.brr.com.au/event/44405 |
There has been a jump in the number of Australian households expecting to have higher levels of debt in three months time and young people are showing increasing signs of severe debt stress according to the latest Dun & Bradstreet Consumer Credit Expectations Survey.
The Dun & Bradstreet (D&B) survey, conducted by Newspoll in the last weekend of March, focused on Australians' expectations for credit applications, credit usage and debt performance over the next three months (June quarter).
The survey found:
- Young people are showing signs of severe debt stress with 18 - 34 year olds having the highest expectations for problematic credit card use and missed payments over the June quarter
- A clear gap is starting to emerge between the credit expectations of Australians earning less than $30,000 per annum and those earning between $30,000 and $70,000
- Credit demand remains strong with a steady number of Australian's expecting to apply for new credit facilities over the next three months as compared to previous quarters
- There has been a jump in the number of households expecting to have higher debt levels in three months time.
Dun & Bradstreet CEO Christine Christian believes the Consumer Credit Expectations Survey shows that the impact of high interest rates, high fuel prices and strong inflationary pressure is showing through.
"It's clear that consumers have been struggling with the rising costs of petrol and other daily items for sometime now," said Ms Christian.
"However the recent series of interest rate rises has increased the level of pressure on many individuals to the point where a growing number of households expect their overall debt levels to rise further."
Close to one third (28%) of respondents expect their level of household debt to be higher in three months time, up from 20% when the question was first asked in October 2007. Young Australians (aged between eighteen and thirty four) have seen the greatest rise in household debt expectations over this period - jumping from fifteen to twenty-six per cent. Those earning less than $30,000 per annum have also recorded a significant rise in debt expectations, with thirty-nine per cent now expecting household debt to be higher. This has risen from thirty per cent in October 2007. The gap between expectations for this income bracket and the next is widening.
The number of people intending to apply for a new credit or loan facility is also higher in the younger age groups. Twenty four per cent of those in the 18-34 age bracket intend to apply for a new credit facility in the June quarter. Meanwhile the national average is fourteen per cent.
When examining expectations for credit card use, more than one in five Australians' expect to use their credit card to finance purchases they otherwise couldn't afford. However this figure jumps to twenty-eight per cent for Australian's aged eighteen to thirty-four.
Women have higher expectations of problematic credit card use than men, with twenty-five per cent and nineteen per cent respectively expecting to use their card to cover otherwise unaffordable expenses. Interestingly, there is almost no difference in problematic credit card use when comparing respondents by income brackets.
Problematic use of credit cards, particularly among younger Australians is just one sign of increased debt stress. The D&B Consumer Credit Expectations Survey also found that eleven per cent of people aged eighteen to thirty-four expect that they will have to miss a bill or debt repayment in the next three months. The amount of women with this expectation is double that of men.
This is consistent with Dun & Bradstreet collections data throughout 2007 and early 2008 which shows that an increasing amount of the debt referred for collection is related to young Australians.
The number of young people who expect to miss a repayment combined with the number who expect to use their credit card to cover otherwise unaffordable expenses points to the fact this response may be more than just a blip.
Ms Christian believes the data relating to younger Australians is particularly concerning.
"The fact that around one in ten young people expect that they will miss a bill repayment and more than twenty-five percent expect to be forced to use their credit card to cover expenses is a sign that this group in particular are experiencing significant debt stress."
"Young people need to ensure they are paying close attention to the management of all their debts and lenders need to be extra vigilant in lending practices as the domestic implications of the global credit crunch continue to emerge."
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.
