Aussies’ personal debt exceeds $70 billion as inflation forces people to use credit cards and loans

Australians now owe more than $70 billion in total as the cost of living crisis fuels an explosion in personal debt, a new comprehensive poll shows.

Millions of people have turned to loans and credit cards over the past 12 months while inflation has increased household bills and the price of groceries and other consumer goods.

With inflation running at 7%, research by financial comparison website Finder shows the average Australian now has $20,238 in debt spread across consumer loans and credit cards.

That’s an 11% increase from a year earlier, when the average person had $18,301 worth of credit cards and consumer debt, according to the study.

Finder data shows that around 10.9 million Australians — about 54% of the adult population — were using a credit card last month.

And around 2.8 million Australians, or one in seven, have a personal loan. The percentage of the population that borrows to buy a car is similar.

On average, each Australian currently has $1,948 in credit card debt, a $6,920 personal loan and a car loan with a balance of $11,370, according to Finder’s consumer sentiment tracker.

Conducted by polling company Qualtrics, the survey aims to continuously chart comprehensively on consumer sentiment in Australia.

Finder says the survey covers a nationally representative, growing sample of more than 51,000 people, with 1,000 people added to the poll each month.

Surveyees were asked how they got ahead in many areas including wealth, happiness, financial sentiment, and environmental awareness.

The survey found that credit card liabilities have increased in total to $18.6 billion while personal loans and auto purchases are now worth an estimated $19.6 billion and $32 billion, respectively. ,3 billion dollars.

Personal debts have increased in total to $70.5 billion.

While government officials and the Reserve Bank believe inflation has begun to ease after peaking late last year, consumer prices remain high and are not expected to return to normal until late last year. end of 2024.

Separate research from Finder has found that 6.1 million or 30% of Australians are extremely stressed about their current financial situation, up 22% from a year ago.

Finder’s personal finance expert, Amy Bradney-George, says the rising cost of living has forced many people to borrow money just to pay for the essentials.

“Many people have to turn to credit cards and personal loans just to cover everyday expenses like food and electricity,” she said.

“Debt is making people even more stressed about putting food on the table.”

Urging Australians to protect their “financial health”, Ms Bradney-George points to the so-called debt snowball method as a way to regain control.

“If you start by paying off your smallest debt first, you will see quick wins that help build momentum,” she says.

She also recommends people contact their lenders to see if they can set up payment plans that work for their income.

“If your circumstances have changed, you can also talk to your bank’s hardship support team about different options, such as pausing payments,” she says.

“You can also look for better rates or consider debt consolidation to help manage repayments.”

Australians are amassing a mountain of personal debt while mortgage holders struggle with higher repayments due to rising interest rates.

Additionally, health insurance premiums, HELP debt and energy bills for some households and small businesses are all up or about to rise.

Electricity costs will soon rise again for some households and small businesses in some parts of the country, with the Australian Energy Regulator confirming prices will rise by 20 to 25 per cent from 1st May. 7 in NSW, South Australia, southeast Queensland.

Despite federal government intervention in the energy market and lower wholesale electricity prices than this time last year, customers using the default energy offer face significant price increases in fiscal year 2023-2024.

About 9 percent of customers or 600,000 are using the default market rate, which acts as a safety net or benchmark to ensure users are not overcharged.

However, Anthony Albanese told parliament on Thursday that five million Australian homes and one million small businesses will soon have relief on their electricity bills.

Under a policy announced late last year in response to soaring electricity prices partly due to the war in Ukraine, the federal government will give money to states and territories to take money from their energy bills. of people this winter.

But not everyone will benefit from the discounts, because they will only go to income-supported households and small businesses that meet certain eligibility criteria.

Speaking in parliament on the last day of meetings before politicians flew home for winter break, the Prime Minister also laid out a list of several other Labor cost-of-living measures.

“More than 1 million Australians will pay less for childcare next month; 11 million Australians will pay less to see a doctor Thanks to our budget, another six million Australians will pay less for their medicine.”