Veda Advantage: Australian Debt Report

Veda Advantage’s latest Australian Debt Report reveals some healthy signs as significant numbers of Australians switch to saving, and pay down their debt in the face of the global financial crisis. Almost half of the Australians with debt surveyed owed less than they did 12 months ago, while 40% owe the same amount. Only 13% of Australians with debt now owe more money than they did 12 months ago. 

Despite this, one in five (18%) Australians with debt are still finding it difficult to make repayments – a percentage that hasn’t improved in the past six months, and these families are much more likely to apply for new credit they may not be able to afford, with 23% of those considering new credit in the next six months currently finding it difficult to make repayments.

The indexed Report also reveals 64% of Australians are keeping their finances within budget, a 7% improvement from Veda Advantage’s Australian Debt Report in September 2008.

Other key findings include:

• Four in five (80%) of Australians remain worried about the ability to repay their bills on time. This figure has remained at around 80% over the past 18 months.
• Almost three in ten (28%) Australians fear they will lose their job in the next 12 months. Australians most concerned over their job security were aged between 35 and 49 years. The number of Australians concerned abouta potential drop in personal income has also increased since September 2007.
• One in ten Australians are also looking towards borrowing more credit in the next six months. Almost 40% of these Australians looking to apply for credit come from low-to-middle income households, while 20% earn less that $40 000 a year.
• Almost 15% of Australians who owe more than they did 12 months ago are likely to apply for more credit in the next 12 months.  

Chris Gration, Veda Advantage’s head of external relations, said that overall, the Report shows encouraging signs that Australian families are responding well to tough economic times, but that now more action is needed from government.

“The report has found Australians are paying down their debt, and most are currently living within their budget restraints. They may be taking advantage of lower interest rates and are watching what they spend their money on in the current economic downturn.

“However, the Government should be mindful of those families that are potentially caught in a debt spiral.

“Of those who owe more now than they did 12 months ago, 13% are likely to apply for credit in the next six months, and 23% are already finding it difficult to pay their bills on time. We know that families in difficulty are often tempted to seek additional credit but Australia’s existing privacy legislation prevents credit providers having full insight into whether applicants are over-committed at the time they apply.

“The best protection for borrowers and lenders is having access to the right information about an applicant’s credit activity and exposure. The Federal Government needs to fast track changes to Australia’s credit-reporting laws, committing to introduce the new comprehensive credit reporting legislation by December 2009 and enact them well before the next election.

consumers. This has to be a high priority for working families,” Mr Gration said.

The Federal government’s credit reporting and responsible lending reforms will ensure only those Australians who have the ability to repay loans have access to new credit, and that those Australians who pay their bills on time may be rewarded for doing so. Under the ‘negative credit reporting’ permitted by current laws, a bank or credit union is unable to see whether a consumer is overcommitted, and nor what their payment history on active credit accounts has been.

“The Federal Government needs to introduce a draft credit reporting bill by October this year so that appropriate credit reforms can be put in place by 2010. Now is not the time to ignore responsible lending,” Mr Gration said.