While Australians remain willing to borrow to buy a property, they continue to shun borrowing for other areas.
Nothing quite underlines that point than the statistic Commsec uncovered today following the release of Australian lending finance figures for October.
For the first time on record, annual growth in credit cards has fallen. Not balances, but actual cards.
“Welcome to the age of the ‘new consumer’,” said Craig James, Chief Economist at Commsec, pointing to the chart below showing annual growth in credit card accounts turning negative for the first time since records first began some 23 years ago.
And along with a reduction in total credit cards, it’s clear that Australians aren’t spending likely they used to with the average credit card balance falling $15 to a decade-low of $3,061.90.
So not only are total credit cards lower than a year ago, the average balance of those that remain sits at a decade-low.
“The Aussie consumer now wants to live within their means,” says James. “People love the flexibility and ease of use of credit and debit cards, but they have grown more wary of piling up the debt. Much is due to Gen Y who shun credit cards in favour of debit cards.”
Indeed, while the the average credit card limit rose by $16 to $9,128.60 in October, leaving it up 0.8% on a year earlier, James says the utilisation of those limits stood at just 33.5%, the lowest level in 19 years.
With many Australians now choosing to use existing savings rather than to fund purchases, it goes someway to explaining why, along with weak wage growth, household spending growth is now running well below the levels reported in the years prior to the global financial crisis.
The reduction in the number of credit cards may be due to recent changes to credit card rewards programs introduced in July which saw many issuers limit benefits and transaction amounts that accrue reward points.