Total and new personal loans have plummeted, as Australians prepare for long-term economic pain due to COVID-19.
The value of new loan commitments for fixed-term personal loans fell by 8.2 per cent to $1.66 billion in March 2020, according to fresh data from Australian Bureau of Statistics (ABS). It marks the biggest monthly drop since November 2008, during the global financial crisis.
Personal loans still saw an increase of 0.5 per cent in the 12 months to March 2020.
The ABS attributed the March decline to a 10 per cent fall in road vehicle lending, while loans for travel and holidays plunged by about 42 per cent, as Australian borders closed to stop the coronavirus spread.
Total outstanding personal credit, which includes personal loans and credit cards, edged down by 1.4 per cent to about $163 billion in March 2020, the latest Reserve Bank of Australia data showed. It dropped by 6.5 per cent in the 12 months to March 2020.
Loans overall, including housing, personal and business, increased by 1.1 per cent in March and 3.6 per cent over the year.
Personal credit was the only segment to see a decline.
The findings align with NAB’s latest quarterly Australian Consumer Anxiety Survey, which found that consumers increased their spending on paying off existing debts.
Personal finances tumble downhill
More than 30 per cent of Australians have seen their household finances worsen in the month to mid-April, a new ABS survey indicated.
“One in 13 Australians (7.5 per cent) said their household lacked the money to pay one or more bills on time, and one in ten (10 per cent) had to draw on accumulated savings to support basic living expenses,” said Michelle Marquardt, ABS Program Manager for Household Surveys.
About a quarter of Australian adults received the first one-off $750 economic support payment from the government.
The ABS poll also found that:
- 81 per cent of Australians say they could come up with $2,000 for an important expense within a week.
- One in eight said they could access $500 but not $2,000 within a week.
- 5 per cent would not be able to raise $500.
Most households held savings buffers when the economic downturn began, the RBA’s latest Financial Stability Review suggested.
Employees who have seen a hit to their incomes would be able to access wage subsidies and superannuation funds to help them through the slump. Mortgage repayment deferrals will also help Aussies manage their larger debts.
To see a list of lenders providing breathing room to affected Aussies, check out RateCity’s COVID-19 relief hub.