Cautious consumers wind back spending on credit cards

Submitted 23/03/2009

AAP

New data shows consumers are more keen to pay off debt on their credit card than rack it up, coinciding with a rush of data showing the economy is doing it tough.

Reserve Bank of Australia data shows just over $18 billion was repaid on credit cards in January, while just $16.622 billion was spent.

Credit card spending was down 21 per cent from the previous month.

Other data released today showed new vehicle sales fell by a further seasonally adjusted 3.5 per cent in February, while imports dropped 4 per cent in original terms to $16.6 billion in the same month.

This included a 13 per cent decline in foreign consumption goods.

At the same time, building commencements of houses and other residential properties in the December quarter fell by a seasonally adjusted 9.9 per cent to 32,637 units, contributing to a 19.5 per cent fall in the past year.

RBA assistant governor of economics Malcolm Edey says Australia is being affected by the "very severe" global economic crisis and sharp downturn in global demand and activity.

"In this environment, it's not going to be possible for Australia to avoid some further weakness in 2009," Dr Edey told a business breakfast in Sydney.

Business conditions have also fallen to their lowest level since the recession of the early 1990s, despite business confidence stabilising, albeit at an 18-year low.

The Australian Chamber of Commerce and Industry-Westpac survey of industrial trends for the March quarter showed steep declines in new orders, output, employment and overtime.

The ACCI-Westpac composite index fell to 34.0 in the March quarter from 40.4 in the previous three months.

A level below 50 signals a contraction in activity.

ACCI director of industry policy and economics Greg Evans said the report showed the effect of a slowing economy starting to take its toll "very heavily" on Australian business.

However, he said, one positive aspect of the report was that business expectations had stabilised, albeit at one of its lowest levels.

"That may be in part due to the impact of the Government's fiscal stimulus package, and also continuing easing on behalf of the Reserve Bank," Mr Evans told reporters in Canberra on Thursday.

"Given the evident economic weakness, not only in this survey, but more generally in other surveys and in official data, we believe that a strong case exists for the Reserve Bank to loosen monetary policy by at least another 50 basis points at its meeting in early April."