Australia | Apr 17 2008
By Chris Shaw
More and more the Australian market is coming around to the idea the Reserve Bank of Australia (RBA) has finished with its cycle of interest rate hikes, with recent economic data continuing to indicate the economy is slowing down. Credit card statistics for February offer the latest evidence as credit card debt gowth has slowed to its lowest rate of the past 13 years, which is as long as records have been kept.
CommSec equities economist Savanth Sebastian notes while the average credit card balance of $3,085 in February represents a 4.2% increase in trend terms over the past month the outcome is that the rate of growth is now trending down as consumers focus on debt consolidation and refinancing rather than continuing to spend.
Credit card advances are also trending down and this, Sebastian suggests, means consumers are attempting to avoid expensive forms of debt. As well they are trying to avoid interest charges as the February data also show an increase in repayments being made on time, meaning a greater effort on the part of consumers to only spend within their means.
One point Sebastian takes from the figures is it implies household balance sheets are in relatively good shape as consumers are able to shift their focus to lowering the outstanding balance and can adjust their spending to make repayments earlier.
The other point is of more relevance to equity prices as the credit card data lead Sebastian to suggest only unexpectedly high inflation figures next week would see the RBA react with a further increase in interest rates, as the evidence flowing through continues to suggest enough has been done to bring growth down to manageable levels, which in turn should bring the inflation rate down to within the RBA’s target range.