More evidence this week that Australians are still acting in a financially conservative way, a direction that last night’s Federal budget won’t force people to change.
In fact you could argue that the Federal Government has finally woken up to the conservative way millions of Australians have been acting in their saving and spending patterns in recent years.
It would be a welcome development is this actually happened.
According to Reserve Bank data they are continuing to pay down credit cards, just as they are still socking money away on home mortgages.
The larger than needed home loan repayments have been remarks upon by the RBA now for three years and are in addition to the savings rate which has jumped to around 10%. That also includes companies of all sizes and is estimated at some $90 billion a year in total.
Now we have RBA data showing that the average balance of bank credit cards dipped 2.4% in the year to March (to an average $3,256).
More importantly the average balance actually accruing interest fell 5.7% in the year to March, the largest drop so far recorded, to $2294.
Of course the same figures showed there’s a logical driver to this behaviour, besides prudence. That was the sluggish way the banks have not passed on rate cuts to credit card holders.
The RBA has dropped cash rates by 2% since November 2011, but the RBA data revealed that the fall in credit card rates has averaged just 0.12%.
The banks have also failed to cut lending rates on personal loans, and are not being all that generous with small and medium business.
As well, car loans have only seen around 0.6% fall in their average rate since late 2011. That’s as car sales have been buoyant for the past couple of years.
But if credit card usage is being curtailed then the 3.2% rise in retail trade in the year to March, must be coming from cash, or cards where the out standings are being quickly repaid.
It’s not coming from people using the rising equity in their home loans (from the higher than needed repayments), nor is it coming from new home owners spending up on furnishings and fittings.
But he faster repayments of credit cards and home loans does help explain why many retailers are doing it tough, and why much of the discretionary spending is on products such as food, coffee, meals etc.
Australians step up credit card repayments as banks delay rate cuts
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In its Statement of Monetary Policy issued earlier this month, the RBA said most of the credit growth among consumers was coming in housing, with much of that being refinancing by existing mortgage holders (seeking to cut the cost of their loans by taking advantage of the lower interest rates).
"The value of total housing loan approvals has increased in recent months to be around 10 per cent higher over the year.
The increase in approvals over the past year has been underpinned by loans to repeat-buyer owner-occupiers and investors.
"In contrast, first home buyer approvals have decreased further and are yet to show signs of recovery following a number of changes to first home buyer incentives by some state governments last year, which has refocused assistance on purchases of new homes.
"Despite the recent lift in loan approvals, the stock of housing credit has continued to grow at around 4.5 per cent over the year to March. Investor credit, the smaller component of housing credit, has grown at a faster rate than owner-occupier credit.
"While there has been a pick-up in owner-occupier loan approvals in recent months, this increase has been driven by repeat-buyer owner-occupiers who generally need to repay an existing mortgage and therefore do not contribute as much to credit growth compared with first home buyers.
"In addition, households have accelerated their mortgage prepayments, which has reduced credit growth."
