AUSTRALIANS are still being incredibly restrained with their spending with data from the RBA showing that outstanding credit card balances have fallen for the fourth consecutive month – the first time since 1985 when the bank began tracking.
The figures are from October, prior to the RBA’s cut to official interest rates in November and December, and will be interesting to watch as they flow through the domestic economy and crucial pre-Christmas retail spending period.
According to MasterCard’s analysis of the figures (MasterCard Papers) the information is a “pretty sensitive gauge of how the person on the street feels about the wider economy (and their relative place in it).”
“It neatly reflects – or perhaps even leads – sentiment. In October it was clear that sentiment remained fragile and consumer caution is still very much the pervasive influence.
“So when outstanding credit card balances start to fall, it’s a good sign to us that consumers are actively eschewing perceived risk and limiting their exposure to unsecured debt in the process.”
According to the analysis, following the RBA’s actions in November and December, forecasters will be expecting a lift in spending and overall balances to arrive soon.
“A likely reason that consumers have held off spending so far is that they have been salting away a little extra for the holiday season which carries a seemingly unavoidable rise in expenditure,” according to the analysis.
“But the big question for local retailers will be whether consumers will return to the stores in the way that have in previous years or whether the phenomenon of online shopping is here to stay.
“Although it’s still too early to make that call, what is significant is that many local retailers have accelerated their online presence with a view to capturing more consumers – including a few high profile and vocal critics of this whole internet purchasing thing.”