Plastic off leash as confidence returns
22 January 2010
SHOPPERS have let their credit and charge cards off the leash in a sign of confidence in the strength of the economy, putting $20 billion on plastic in November, the most in two years.
Consumers spent $20.004bn on credit and charge cards in November, up from $19.189bn in October, Reserve Bank of Australia figures show.
It was the highest monthly spending since December 2008 and up by 4.2 per cent on the previous month. Commsec economist Savanth Sebastian said: "The improvement in economic conditions and the sharp rise in consumer sentiment is starting to filter through to credit card usage.
"No doubt the sustained improvement in labour market conditions, and rising wealth, is giving consumers more confidence to use plastic."
The average credit card account balance was $3196 in November, up by 1.8 per cent from $3141 in October. Mr Sebastian said an improvement in retail sales had shown up in the debit card statistics and that was filtering through to credit card figures.
The news comes after consumer confidence figures this week suggested Australians shrugged off the disappointment of three interest rate rises late last year. The Westpac confidence index rose after two months of decline.
Given the strong economic data, the RBA is expected to increase the official cash rate by a further 0.25 percentage points to 4 per cent when the board meets again on February 2.
The RBA figures showed the total amount owed on cards in November was $46.048bn, a 2 per cent rise from October's $45.153bn, the strongest monthly growth in total credit and charge card balances since February 2008.
November is often a month of strong growth, in the lead-up to Christmas.
The figures show the average growth in balances for November over the past decade was 2.1 per cent, but the rise between October and November 2008, in the midst of the global credit crisis, was only 1.2 per cent.
While Australian shoppers were putting more on plastic, the pace at which they were repaying debt slowed.
Repayments on credit cards fell 0.6 per cent in November to $19.530bn, while credit card balances accruing interest rose to $33.070bn in November, from $32.385bn in the previous month.
The November result went against the annual trend of total credit card repayments, rising 11.2 per cent.
The value of cash advances on credit and charge cards fell by 2.3 per cent to $954m in November from $977m in October and $1.028bn in November 2008.
Source :The Australian Total Eftpos purchases, including cashouts, fell to $11.898bn in November, from $12.078bn in the previous month, down 1.5 per cent. The value of eftpos purchases was up 14.4 per cent in the 12 months to November.
