The Australian recently reported that the Reserve Bank of Australia has estimated national credit to stand at $2.1-trillion, a figure that includes home loans and that is indicative of how readily Australians are to snap up loans. While an International Monetary Fund (IMF) report has stated that too much lending could have a negative impact on the economy, analysts have seen the lending as a positive sign, and that the cash will benefit the economy when it is repaid.
The IMF has warned Aussies to exercise caution, as loans should not exceed 100% of a country’s GDP but Australia’s sitting at 140%. The Australian Bureau of Statistics has indicated that loans increased by 0.6% between March and April 2012 as did the number of people applying for fixed financial package. This news comes amid reports that Aussies have cut back on their spending and are investing more in saving now than ever before.
Analysts have read the increase in personal loans as an indication of how much people need help to cope with the growing cost of living. Other data has revealed some interesting information about Australian spenders as it has emerged that 39% of locals do not have access to mainstream bank accounts, personal loans and credit cards because the initial fees are too high and they have chosen to work with alternative service providers instead. The result of this though, means lower start up charges that balloon into high interest rates over the long term, leading a growing number of people into more debt. 39% of local people translates into 3-million which, given the size of the country’s banking sector and strength of the economy, is just too much. Personal loans that suit one’s lifestyle, spending strategy and habits, are now easily accessible online—a quick bout of online searching instantly led us to the comparison tool available via BankWest.com.au.
Unemployment has risen from 5.1% in January to 5.5% in June, but 25% of the population is involved in some kind of casual labour. While it might be earning them some extra income, it also means that they are less likely to qualify for home or personal loans, sick leave or holiday perks. This has raised questions over protection for employees who have temporary employment.
As people continue to feel the pressure of global financial uncertainty the number of loans, revolving credit commitments and fixed arrangements have been increasing steadily since March as people try to find ways of coping with the rising cost of living and other financial pressures.
The increase in loan applications signals a turnabout in consumer behaviour, which was slowed down by job losses and rising unemployment figures. Recent reports from Victoria claim more than 33,000 job losses this year, forcing it into a worse unemployment rate than the national average. The unemployment rate has been attributed to a slowdown in industry, particularly in the retail, manufacturing and construction industries which were three of the state’s most important sectors. Unemployment is also said to be hitting school-leavers hard, with one in five youths unable to land themselves a job.
The increase in loans is a positive sign for the economy for, if banks are happy to lend the money out they must be getting more in from somewhere, and the increase in the number of bank deposits in circulation probably has something to do with the change. Rate cuts have probably also encouraged the rate of loan applications to increase, as people are starting to feel more confident about rebuilding after a period of stagnation and, analysts believe that we could be in for more rate cuts before the end of the year is out, making the environment more conducive to borrowing. And, with all the interest between banks and lenders, now could be a great time to get a good deal with good interest.