Consumer debt on the rise

Australian consumers are struggling under an increasing mountain of debt, despite improving economic conditions, new research has found.

June quarter figures from Dun & Bradstreet show that the average value of referred debts is at a four-and-a-half year high, rising above the $1,000 mark.

This is a 25% increase on the same quarter last year and an 8% rise on the March quarter figures. The results come despite improving economic indicators elsewhere and will be of concern to small firms looking to lure high-spending consumers.

Dun & Bradstreet says that referred debts are usually the first sign that a consumer has hit financial trouble and, therefore, bankruptcies could rise towards the end of the year and into 2011.

The research also reveals that the average time between first and second defaults is just 10 months, with those with utilities or telecommunications debt far more likely than the average consumer to default on other types of credit.

Men are more likely than women to be in debt, according to the figures, with young people more susceptible than their older counterparts.

Christine Christian, CEO of Dun & Bradstreet, says: “It is clear that for some households the return to a more sustainable financial situation could take some time.”

“Consequently, it is imperative that credit providers conduct suitable due diligence to ensure they provide appropriate levels of funding for each individual’s situation.”

“In addition, this process will ensure that lenders effectively manage their lending books as default risk will remain prominent in the months ahead.”