Federal Treasurer Wayne Swan has attributed new figures showing an increase in average household wealth to Labor’s response to the global financial crisis, although consumer spending remains very conservative.
New Treasury data reveals average household wealth increased by more than 20% between 2004 and 2010. In the same period, median household wealth in the United States fell more than 30%.
“Contributing to this was our stimulus response to the GFC… as well as our decent social safety net and government policies that spread opportunity,” Swan wrote in an economic note.
But like all countries, Swan said Australia has not escaped the impact of recent global economic turmoil.
“This was clear in the Budget papers in May, which showed $150 billion wiped from government revenues since the onset of the global financial crisis,” he said.
“Australians have also seen the impact on their household wealth.”
“This is obvious not only in the performance of people’s superannuation accounts in recent years, but the more cautious attitudes towards debt.”
The news comes on the back of the release of credit data analysis firm Veda’s Consumer Credit Demand Index for the second quarter of 2012, which shows overall consumer credit demand has increased by just 0.1%.
Overall, consumer credit demand fell slightly in the June quarter and was flat over the financial year ended June 30.
The June quarter result was driven by a drop in credit card applications, partially offset by a small rise in personal loan applications.
In comparison to last year’s June quarter, applications for personal loans showed modest to no change over the year in the ACT, NSW, Victoria, Queensland, South Australia and Tasmania.
Personal loan applications only continue to show solid growth in mining states Western Australia (up 6.7%) and the Northern Territory (up 5.1%).
Personal loan applications have edged ahead of credit card applications, while the outperformance of personal loans relative to credit cards is being seen right across age groups.
Credit card applications remain soft in all states. Over the past year, credit card applications have only risen in the ACT (up 3.1%), Western Australia (up 1.3%), and Victoria (up 0.7%).
Weakness is evident in NSW (down 2.5%), Queensland (down 2.6%), and South Australia, while Tasmania continues to see a sharp decline in credit card applications over the past year.
The Reserve Bank’s interest rate cuts in May and June appear to have helped lift consumer sentiment close to a neutral level, according to Veda.
However, fears about the global and domestic economic situation – in addition to share market declines and labour market uncertainty – mean consumers remain cautious about credit.
“Household assistance payments and similar stimulus from government are known to support consumer spending,” says Angus Luffman, head of consumer risk at Veda.
“But invariably [they] also lead to an increase in credit demand in the near term.”
“We are already seeing some effect from this… in the June numbers, with an 8.7% lift in credit card enquiries and 9.8% increase in personal loan enquiries compared to May.”
“[There has also been] a 6.6% increase in personal loan enquiries compared to June 2011.”