Beat recession crunch

The growing group of Australians struggling with debt should contact their lender, writes

RECESSION-RELATED debt pressures are set to squeeze household finances as Australians’ borrowing remains near record highs.

New Reserve Bank figures show bank loans rose 4.4 per cent in the year to April 30 to $2.76 trillion, and have continued to climb during the coronavirus pandemic. Nonhousing credit has dipped since January but is still 7.3 per cent higher than a year ago.

Separate data from credit agency Equifax shows consumers are heading into

Anthony Keane

arrears on their loans at a higher rate, more for motor vehicle debt and personal loans than for credit cards and mortgages.

Equifax executive general manager Moses Samaha said it was important for people who were struggling to get in touch with their lender quickly.

Hundreds of thousands of Australians have deferred mortgage repayments through lenders’ COVID-19 schemes, and Mr Samaha said some people might not realise assistance was also offered for other credit products, or they were “too proud to ask for help”. “Equifax has seen the first signs that some consumers were struggling to meet their April monthly repayments, with an increase in the number of consumers who were more than a month overdue,” he said.

The “true impact” of debt struggles might not be clear until later this year once deferrals and government stimulus ended, Mr Samaha said.

He said demand for credit cards and personal loans remained low, but motor vehicle finance was back to PRE-COVID levels. “We expect this is due to a number of factors, including government stimulus and potentially a demand for a vehicle to avoid public transport,” Mr Samaha said.

Mortgage demand is higher debt because this is our first one in 29 years.

Mr Bleyer said Australians were generally wary borrowers, and tougher lending approval processes had made it harder to get debt.

“But some people are still spending well above their means and requesting higher credit limits,” he said.

“They just keep consuming and are not looking at trying to do a budget.

“They never got the message that credit card debt is toxic and won’t just magically go away.”

Mr Bleyer said people with debt problems should first look inward.

“No one is going to solve your debt for you,” he said. “Pay off the highest interest debt first and look to consolidate.”