The US financial crisis has hit a huge blow to the Australian economy, with a report revealing that the number of Australians making their first credit card payments has been cut by nearly 60 per cent since September.
Key points:Credit card payments have fallen by more than 60 per to $3.3bn since the start of the financial crisisThe Australian Federal Government says it’s working to address the problem, but experts say it is still a crisisThe US has the highest credit card penetration rate of any major economy, according to Credit Suisse, and is a leader in terms of the number and type of credit cards issued by the banking system.
The report, released by Credit Suiss, says that in November, US banks issued an average of 4,000 credit cards per day, and in Australia that number was 6,000.
The Federal Government has pledged to increase the number, but Credit Suess says that will not be enough to make a dent in the problem.
The US is the largest creditor to Australia, and has the second highest interest rate, at 2.75 per cent.
“In terms of overall credit card growth, Australia has a very long way to go before we reach the level of credit card volume that we saw in the early part of the decade,” said Andrew O’Brien, senior economist at Credit Suiser.
“We are seeing a very slow increase in card volume over the last few years.”
Mr O’Brian says that the US has a huge number of Americans, and there are a lot of people in the US who are not using their cards to pay for things.
“If you look at people who have credit cards, we’re seeing about a quarter of them are still making their credit card payment through credit cards.
So that’s a pretty big chunk of the population, and that’s the majority of people who are getting their first payment from credit cards,” he said.”
The vast majority of Americans are using credit cards for their primary form of payment.”
In October, Australia reported that it had about 7,500 people in its credit card system.
“I think it’s clear that there’s still a very big amount of creditcard debt in Australia,” Mr O’Briens said.
But the Australian Banking Association has been pushing the Federal Government to increase card penetration rates.
“As a country, we’ve got to be thinking about the fact that the majority are going to be getting their money out of the banking sector, and not going into the real economy,” it said.
Mr OBrien says that Australia needs to be prepared for the effects of the crisis, but the number is not the main concern.
“It’s a different situation in the United States.
In terms of our ability to deal with the debt that we’re in, there’s been no major change in the way we are structuring our credit,” he says.
The number of credit accounts in the system has also dropped dramatically.
In November, the US issued more than 13 million credit cards compared to more than 10 million in November 2010.
Mr Ainslie says that there are many people in Australia who are able to get their first card payments through a credit card, but they are also going to face the challenge of getting them out of their old card and into a new one.
“You’ve got a lot more of people that have got credit cards and are now going to have to move towards getting a new card, because they can’t get a new credit card without having the money they have now, which means they’re going to need to find another card,” he told 7.30.
“So there’s going to remain a big need for new cards for a lot longer, but also the need to make sure that those people that are currently not using the cards are using the new ones.”
Mr Aenslie says the government needs to focus on addressing the issues of people using credit to buy things.”[Credit cards] are an important part of many people’s everyday lives, and we have to make it easier for people to get credit,” Mr Ainsli said.
He says there’s a lot that can be done to encourage people to use credit.
“Credit card usage is increasing and it’s rising, but there’s also a lot we can do to encourage a lot greater use of credit and a lot less spending on credit cards to support that increase,” he added.
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