Consumer Confidence Levels On The Rise
Australian central bank, the Reserve Bank of Australia, uses various indicators to measure consumer confidence levels. One such indicator is the amount of average household spending on non-discretionary items. This means how much we‚’e spending on things that aren’t essential purchases or non-grocery related.
However, one of the primary indicators of consumer confidence levels is measuring the total value of transactions made via credit card. During the month of February 2010, credit card spending had increased by more than 6%, showing that Australians are beginning to shake off any effects of the global financial crisis and get back into the stores.
Unfortunately, this level of consumer spending on credit cards also saw a direct correlation in the amount of average credit card balances for the same period of time, seeing an increase of 3.29% up to $3,250 average balance per cardholder.
While the RBA tries to determine whether consumer spending is increasing, checking on how much money was spent using a credit card may not be the ideal way to judge our confidence levels.
Even though the increase in spending on credit cards may have risen, the numbers also show that there is a marked increase in the number of transactions made using a debit card rather than a credit card. While a 6% increase in credit card spending might seem positive, it’s worth noting that the use of debit cards in the last year has increased by 30%.
It’s a fair assumption to make that Australian consumers are gaining confidence and beginning to spend in our economy again. However, it’s also clear that the global financial crisis may have been the catalyst required to encourage the average person to reconsider their methods of payment and curtail some of their previous credit card spending behaviour.
It seems that Australians are still willing to spend, but instead of borrowing money from their bank on a credit card, consumers increasingly prefer to use their own funds for household spending needs. More people are realizing that a debit card doesn’t come with the high interest costs of borrowing money on credit, but still allows them the flexibility of paying for their purchases using a card linked to their own account. This is clearly shown by the sharp increase in transactions made using a debit card during the 12 months leading up to February 2010.
