CONSUMERS UNDER CREDIT STRESS

CONSUMERS have put themselves under significant credit stress to go on a Christmas spending spree, says Dunn & Bradstreet.

The credit information bureau predicts consumer financial stress will reach its highest level in more than a year during 2014 in its latest Consumer Financial Stress Index.

Queensland, alongside the Australian Capital Territory, will overtake New South Wales and Victoria as the most financially stressed, says the three-month state forecast.

Queensland’s financial stress index is forecast to hit 27.9 points in March, from a level of 13.7 points a year earlier, while in the ACT the level is expected to more than double to 25.3 points, up from 10.2 points in March last year.

The increased forecasts for both states have been driven by a sharp rise in new finance and credit applications containing adverse listings.

Nationwide, the index is expected to rise again in the first half of this year to 23.4 by June.

“An increase in unmanageable consumer debts during the first quarter of this year, as a consequence of increased spending in the Christmas period, presents a risk to financial stress levels,” says the report.

In Q1 2013, the volume of consumer debts referred to D&B for collection increased by 17 per cent on the previous quarter, while Q1 2012 saw a 33 per cent jump.

“With the Australian National Retailers Association expecting consumers to have spent nearly one billion dollars a day during December, an increase of five per cent on 2012, D&B anticipates the Q1 debt trend will continue.”

The prospect of higher unemployment levels and inflation are additional areas of concern for consumer financial stress levels this year.

Meanwhile, the latest quarterly inflation figures from the ABS have revealed that consumer prices increased by 0.8 per cent last quarter, above economists’ forecasts for a 0.4 per cent rise.

“The continued elevated level of consumer financial stress reflects a paradox in the performance of the economy at the moment,” says the report.

“Despite a solid lift in consumer spending and a pick-up in credit growth, there has been a softening in the labour force data and wages growth is relatively subdued.”