Fewer Australians taking on debt as spending priorities shift

Fewer people expect to see an increase in their level of household debt during the first few months of the year, and demand for credit remains flat, in further signs that Australians are embracing financial conservatism amid the current period of moderate economic growth.

illion's Consumer Credit Expectations Survey shows that expectations for household debt are at their lowest point in three years, with 18 per cent of respondents anticipating their debt will increase in the March quarter. This compares to 22 per cent and 26 per cent for the past two quarters.

Expectations for higher household debt in the next three months

The survey, which measures expectations for savings, credit usage, spending and debt performance, shows applications for new home loans, personal loans, credit cards and credit limit increases will be flat for the March quarter. The survey also reveals that the number of people with a debit card account (77 per cent) has increased to its highest point since September 2009 (67 per cent) as consumers increasingly favour spending from savings ahead of credit.

illion's CEO, Gareth Jones, says that the latest survey reflects a changing attitude from consumers towards debt which is consistent with the cautious mood of the economy.

"Overall, we've witnessed a sizeable shift in the spending behaviour of the Australian consumer. There is a greater degree of consideration being applied to each spending decision and a greater focus on spending within our means," Mr Jones said.

"The use of debit cards is becoming more common, as is a level of caution towards borrowing and debt in general, which has been evident in the increased level of credit card repayments shown in the RBA's November 2012 figures.

"This attitude towards spending, especially on discretionary items, can have a negative knock-on effect for Australian businesses; something that has been revealed in the latest ABS retail figures, which showed only modest activity, and also in the lower sales expectations from our recent Business Expectations Survey.

"The upside to this ongoing mood of consumer conservatism is that we may see an improvement in the levels of personal debt and delinquency, which should help those households experiencing financial stress," he added.

Although illion expects financial stress levels will remain elevated for at least the first quarter of 2013, its latest findings show a reduction in the number of Australians concerned about their financial position. While nearly one-in-two people (49 per cent) surveyed report they are concerned about their current financial situation, the measure is down from 59 per cent in the September 2012 quarter.

The trend suggests that consumers may be better managing their financial position to fit the economic conditions, and that the RBA's interest rate cuts throughout last year may be assisting consumers to address their debts.