Record Credit Debt Tops $40m, But Cash Advances Wane

The Age

Friday July 20, 2007

Marc Moncrief, With AAP

AUSTRALIANS' credit card debt has climbed above $40 billion for the first time, according to Reserve Bank figures.

Statistics released with the RBA's latest Bulletin put the total balance of credit card debt in May at $40.2 billion, $601 million more than in April and an increase of $4.3 billion, or 11 per cent, in the past year.

"With the jobs market so robust and household income rising, we're going to see continued strength in consumer spending," said CommSec economist Martin Arnold.

Repayments rose by 3.5 per cent to $17 billion compared with $16.5 billion a year ago.

The average debt on Australian credit cards has also risen, climbing by 7.2 per cent to $2990 in May 2007. But total cash advances fell to $1.086 billion, compared with $1.135 billion at the same time last year.

Mr Arnold said the higher card balance indicated a more informed and confident public taking advantage of incentives in the market. "Rather than showing people are struggling, using cash advances to make ends meet, it suggests consumers are doing quite well," he said.

"People are continuing to use their cards more effectively . . . and then making repayments within the interest-free period."

Debt is a bugbear for the Federal Government because it increases households' sensitivity to interest rate changes. The average Australian now owes about 159 per cent of his or her disposable annual income - also a record.

Mr Arnold said the strong economy provided some of the impetus for the rise in credit debt, with the data pointing to continued consumer resilience despite inflation concerns and lower housing affordability.

Card issuer Visa yesterday released a statement boasting that credit was used in 32.3 per cent of all household consumption and 65.7 per cent of retail spending. -- With AAP