New figures released by the Australian Financial Security Authority found that personal insolvencies – including bankruptcies and debt agreements – have climbed by nearly 14 per cent this June quarter compared to last year’s figures. Bankruptcies rose by seven per cent, while debt agreements increased by a massive 25 per cent.

However, credit reporting agency Veda has also found that in spite of these figures the nation’s appetite to sign up for credit cards and new mortgages has soured, with credit card applications declining by 0.5 per cent compared to the same period last year. Mortgage applications also fell by 3.2 per cent.

This can be due to a combination of factors, such as the slowdown of residential property markets, weak waged growth, and subdued sales growth.

“The continuing slowdown in residential property markets, coupled with weak wages growth and subdued retail sales growth, had all contributed to the continued slowdown seen in the June credit demand index--which measures demand for discretionary consumer credit,” said Angus Luffman, Veda’s general manager of consumer risk. “Turnover for household goods which is often big-ticket items like white goods and couches which are financed by credit has slowed significantly in recent months.”

New lending commitments have also dropped 3.2 per cent last May, according to the Australia Bureau of Statistics.

“A part of this is the regulatory authorities have been tightening up their settings and that has slowed down credit growth. Lending to investors has also slowed down,” said HSBC chief economist Paul Bloxham. “We are seeing some cooling in the housing market and we’re seeing a significant boost to a supply of apartments which is also contributing to a cooling in the housing market.”

 

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