It’s not just the federal government that’s swimming in debt.
According to the Australian Bureau of Statistics (ABS), many Australians have taken the plunge and found themselves in debt – whether from excessive credit card use or otherwise. However, the outlook isn’t all that bad.
In fact, using credit cards and other financial products in the right way can help build a strong credit rating. Households can be aware of the ramifications of such products and adjust their spending habits accordingly.
Money, money, money
According to the 2014-15 federal budget overview, government debt was $667 billion at the 2013-14 Mid-Year Economic and Fiscal Outlook.
Measures are in place to reduce this debt, while these existing figures mirror other debt trends. Just as in the hallowed chambers of parliament, the issue of debt has crawled into everyday Australian households.
The ABS notes that the spread of household debt isn’t even – while some households are deep in the red, others have no debt at all. In 2011-12, the 20 percent of households with the lowest amount of wealth had an average of $31,000 of wealth.
In a marked contrast, the highest wealth quintile had an average wealth figure of over $2.2 million.
It’s not always about a little or a lot
The ABS noted that between 2003-04 and 2011-12, seven out of 10 Australian households had debt, be it a home loan, accumulation of bills or credit card debt.
“A high level of debt could be difficult to manage for some households with few assets and little income,” the ABS noted.
However, high-income households aren’t exempt from debt.
“On the other hand, high levels of debt held by some wealthy, high income households could reflect their desire and ability to use debt to acquire wealth faster than would have been possible if they hadn’t borrowed,” the ABS explained.
No matter a household’s wealth, a focus on shaping a good credit rating is a must.
Credit demand soars seasonally
Despite the high number of Australians that have a lot of debt, more households are still seeking credit. The Veda Quarterly Consumer Credit Demand Index for the March Quarter found overall consumer demand for credit rose 3.1 percent year-on-year.
“Credit demand in the March quarter is typically strong, following the seasonal peak in spending and borrowing associated with Christmas trading. Certainly this was the case with January and February eclipsing demand for the same months in 2013,” Angus Luffman, Veda’s General Manager of Consumer Risk, said.
Credit cards were the main driver of this growth, rising by 6.4 percent over the year.
If you’re one of the many Australians with debt or seeking credit, make sure you’re paying off what you owe to boost your credit rating.