Australian credit card balances are increasing again, including the amounts attracting interest

  • Shoppers helped propel Australian economic growth to highest level in six years in the June quarter.
  • Households spent more and saved less, sending the household savings ratio to beyond a decade-low of 1%.
  • New analysis from Commsec shows the average Australian credit card balance, including the balance attracting interest, grew by 5% in the year to July, the fastest increase in a decade.

Australian returned to the shops in the June quarter, helping to power economic growth to highest level in six years.

As one economist put it, they spent every last dollar, diverting more money away from saving in order to boost their spending levels.

It’s clear some did that via credit cards, as seen in the chart below.


According to Commsec, using data from the Reserve Bank of Australia (RBA), of the 16.024 million credit card accounts in Australia, the average outstanding balance stood at $3,223.70 in July, up 5% on a year ago.

It was the fastest annual percentage increase in a decade, and left the average balance just shy of five-year highs.

Depending on your point of view, that could either be deemed to be a good or bad sign for the economy in terms of the mindset of consumers.

Are they spending more on their credit card because they’re feeling more confident or because they’re struggling to make ends meet?

While individual circumstances will inevitably differ, the data does provide some clues as to what the answer may be with the average outstanding balance accruing interest also lifting by 5% over the year to $2,034.60.

That too was the fastest percentage increase in a decade.

Although we’re dealing in averages, meaning the results should be treated with a degree of caution, the increase in credit card balances over the past year, especially balances accruing interest, could reflect a deterioration in household finances, at least from a broad perspective.

Given the interest rates that credit card attract, it’s hard to see anyone choosing to let their balance increase given the cost involved.

Although 5% over a year is not alarming, it is something to watch. Especially at a time when households are only savings 1% of their disposable income.

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