Consumer finance market weak, outlook weaker

Conditions in the consumer finance market deteriorated in the September quarter, with falls in loan balances and new personal finance commitments, and there is no turnaround in sight.

According to the latest Reserve Bank credit and charge card statistics, the value of credit and charge card balances fell 0.9 per cent in the September quarter, compared with the June quarter. Balances accruing interest fell 1.9 per cent over the same period.

Australian Prudential Regulation Authority figures tell the same story. Banks' credit card balances fell 0.9 per cent in the September quarter.

Fourteen of the 17 banks and mutual banks in APRA's survey recorded outflows from their credit card books during the quarter.

And the latest Australian Bureau of Statistics lending finance report shows a 1.7 per cent fall in new personal finance commitments during the September quarter.

The ABS figures show a small increase in fixed loans, with revolving credit accounting for the fall.

Conditions in the consumer finance market don't look like turning around any time soon.

In the latest Westpac Melbourne Institute Index of Consumer Sentiment respondents were asked about their Christmas spending plans, compared with the previous year. Thirty-eight per cent said "less", 50 per cent said "same" and 12 per cent said "more".

Westpac chief economist Bill Evans said: "The net balance of minus 26 per cent is the worst since 2008 and a marked deterioration relative to the past five years."