More consumers are planning to use their credit cards this quarter with savings being less of a focus, according to the latest Dun & Bradstreet survey.
The Consumer Credit Expectation Survey shows Australian are demonstrating a less cautious approach to spending money with 41 per cent of consumers intending to use their card for purchases that they couldn’t otherwise afford in months ahead. This is the highest level recorded in three years and suggests that pockets of optimism in the economy are making consumers less cautious about how they spend.
In addition to increased spending on credit, Australians are expected to turn away from saving more money. With a five per cent fall from the previous quarter, 26 per cent of consumers now indicate they are more likely to save money compared to the same time last year, while 31 per cent are less likely.
“After a long period of financial caution, it appears that consumers are more inclined to take hold of the green shoots in the economy, than focus on any negatives there may be,” says Danielle Woods, Dun & Bradstreet’s director of corporate affairs.
“With the RBA maintaining low interest rate levels, the unemployment rate relatively steady, house prices recovering, and a bullish sharemarket, consumers are signalling that the positives outweigh the negatives and consequently are willing to spend more freely on credit.
“The combination of an increased intention to use credit cards and a willingness to forego greater savings suggests that consumers are setting aside their caution, which bodes well for businesses.
“After a long stretch of difficult trading conditions, businesses will be hoping to see a flow-on effect from less cautious consumers.”
The survey also shows the number of people expecting difficulty meeting their credit obligations unchanged at 34 per cent for the third consecutive quarter. The number of people expecting their level of household debt to be higher during the quarter is also flat, at 19 per cent.
While the national survey reveals a less cautious approach to spending, levels of financial concern among consumers vary across the country. For example, financial concern is high among those living in Queensland (59 per cent), where recent floods have impacted the local economy, and also in South Australia and the Northern Territory (58 per cent). In contrast, people in resource-rich Western Australia are less likely to be concerned about their current financial situation (43 per cent).
“The lift in the number of consumers planning to use their credit cards and the fall in the number adding to their savings is a sign of strength in consumer demand and optimism,” says Stephen Koukoulas, economic advisor to Dun & Bradstreet.
“The intention to increase the use of credit cards fits with a range of other recent indicators, most notably the sharp pick-up in retail spending in the early months of 2013 and the jump in consumer sentiment since late 2012.
“The lowering of interest rates since late 2011, together with strong employment growth, rising wages and low unemployment has, until recently, seen consumers rebuild savings and reduce their debt and leverage.
“Consumers’ plans for credit card use suggest this could be about to end, which bodes well for ongoing growth in consumer demand.”