Cautious are expected to remain cautious in the lead up to Christmas, with non-essential spending expected to fall as consumer concern about financial security rises.

Dun & Bradstreet’s Consumer Credit Expectations Survey found half of Australia’s households are less likely to spend on non-essentials in the coming months, while one in three (29 per cent) are more inclined to save than they were 12 months ago. The survey also found that 56 per cent of Australians are concerned about their personal financial situation.

The results come as the Reserve Bank of Australia (RBA) has lowered interest rates in a response to the risk of slower economic growth. The RBA has noted the move by households to deleverage and increase savings as a buffer against economic instability, including the risk of rising unemployment. The bank is now predicting more moderate and sustainable credit growth off the back of this trend in consumer behaviour.

Dun & Bradstreet general manager, Danielle Woods, said the conservative consumer outlook could have a significant negative impact on businesses reliant on the Christmas rush.

“An increasing number of Australians are concerned about their financial security and this is weighing heavily on their plans for the Christmas period,” she said.

“Prioritising saving over non-essential spending is a positive for the balance sheets of Australian households and the Reserve Bank is certainly encouraging this behaviour, in light of uncertain employment conditions. However, it could have detrimental flow on effects for businesses that are looking to Christmas to drive an uplift in sales.”

However, while consumers are planning to avoid non-essential spending and non-essential credit usage during the Christmas period, a significant proportion will need to rely on existing lines of credit to cover the cost of living.

Forty per cent of 35-49 year olds will use credit to cover expenses they couldn’t otherwise afford, up from 35 per cent during the December quarter 2011. In addition, 60 per cent of this demographic are expressing concern over their financial situation and one in three (35 per cent) would last no longer than one month on their current savings without full-time employment.

The figures are slightly lower for older Australians (50-64 years), with one in four anticipating a need to use credit to cover expenses, 60 per cent concerned about their financial situation and 28 per cent only able to get by for up to one month using their current savings.

The low level of consumer sentiment is in stark contrast with the most recent D&B National Business Expectations Survey, revealing a buoyant outlook for retailers over the Christmas period. The disparity highlights that the sales outcome for retailers may be below expectations.

“There is a distinct disparity between the spending plans of Australian households as Christmas approaches and the optimistic outlook of the retail industry,” Woods said. “If households tighten the purse strings as they are suggesting, it is likely we will see lower than expected retail sales growth over the remaining months of the year.”