The Olympic Games were an impressive spectacle in London over the last few weeks and analysts predict that it will create world-wide spending ripples. For instance, the jolliness is expected to contribute $2.6-billion into the Australian economy, the bulk of which is believed to be spent at bars and pubs. And, interestingly enough, this time, it’s the men who are doing the spending and who are more willing to shell out the cash to celebrate the festivities on home soil. The question on everyone’s mind however, is how much of that is going to be put on credit cards?
Consumer Spending Trends Down
Research analysts are projecting that sports fans will spend around $154 each to arrive at the $2.6-billion total, as locals support the Olympic team’s medal hopefuls, but of course those traveling to London will be parting with considerably more cash. The news comes amid reports that consumer confidence is low and consumers are holding back when it comes to spending, according to the Global Consumer Confidence barometer, although this is a trend that is being seen in most countries around the world. Aussie confidence however, is at its lowest point since 2009 and, compared to last year’s results, spending trends have seen a decline of five points, the same drop emulated in the United States, the Netherlands, China and Argentina. Those five percentage points are proving to have a marked effect on buying habits as the general mood is once again becoming more cautious. A steep increase in the cost of living in the major cities has been partly to blame for the loss of disposable income levels, with local residents forced to dedicate a higher portion of their income to mortgage repayments.
In an effort to reduce interest charges Aussies have been swapping credit cards for debit cards as they compare credit cards online, via Bankwest.com.au. Many are thus learning that it pays to reassess their charges and fees, as well where they can start saving money. Transparency on the part of banks may educate cardholders better about the fees and charges they are racking up and this could mark the start of more migrations and account switching in the near future. Consumers gave been urged to compare credit cards and to consider switching accounts in order to take advantage of the new Australian legislation.
The Treasury has also issued a report that the average household income has increased by 20%, in the period between 2004 and 2010, another good sign for the economy and an indicator of financial strength going forward towards the end of the year. Comparatively, over the same period, household income has declined in the United States by 30%. The Federal Treasurer, Wayne Swan, has said that a swift government response, having an adequate social security cushion and the government’s focus on creating financial opportunities for local people had been what safeguarded the majority of people during the global financial crisis.
Despite the increase in household income, disposable income levels have remained low, pressures from debts have remained high and consumers have had to restrain themselves from purchasing, and choose to conduct their financial affairs more conservatively in an effort to beat inflation and the cost of living. The credit card reforms that were passed in July 2012 have also been structured to try and assist the debt-ridden credit cardholder, and the prevailing credit conditions make it an ideal time to compare credit cards and the various deals and incentives on offer from the banks that are all vying so desperately for consumer support.
It does appear that consumers have learned about the dangers of overextending themselves the hard way as credit applications have only increased in three areas: Victoria (by 0.7%), Western Australia (by 1.3%) and the ACT (by 3.1%). New South Wales saw a decline of 2.5% and Queensland’s applications also dropped by 2.6% while reports indicate the figures are also on the decline in Tasmania.