Aussies are getting better at paying off bad debt sooner
AUSTRALIANS are paying off bad debt faster and any idea that "punters are out there geared up to the hilt" is false, a leading banking expert believes.
This week's Federal Budget delivered a blow to the average family, with cuts to incentives like the baby bonus and Family Tax Benefit Part A indexation, as well as a hike in the Medicare levy.
The deep spending cuts are all part of a Federal Labor Government effort to reach surplus before 2016-2017 overcoming this year's $19 billion debt in the process.
But despite the perception Australians are up to their eyeballs in debt, Westpac's chief product officer Jim Tate sees it otherwise.
He told finance firm BDO's Federal Budget breakfast in Brisbane the rate of people paying off debt, compared to last year, had actually accelerated.
"In fact, the amount of credit card debt outstanding is actually lower this year than it was last year," he said.
"So everything you hear about saying the punters are out there geared up to the hilt - that is not true."
According to Mr Tate, credit card debt is down to $35 billion from $36.5 billion last year, despite purchases actually increasing.
The Reserve Bank's decision to slash interest rates over the past year has not enticed mortgage holders to decrease their payments either.
"There are about 80% of people in mortgages that are over two years in front of their repayments," Mr Tate said on Thursday.
"Not because they have actively put more in but they have left their repayments where they are."
Mr Tate said bad debt was at an all-time low and there were only 170 houses in financial institution possession across Australia, compared to 400 five years ago.
"People have devoted themselves to the preservation of cash and this has been going on since 2011," he said.
"Business have done exactly the same, they have been paying off debt and continue to pay off debt in a big way."