Credit Card Crisis Fueled by Rising Cost of Living in Australia

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The continuous rise in inflation is significantly impacting the cost of living for many Australians. One in two Australians is experiencing financial stress as prices continue to rise, and many people are turning to their credit cards to make ends meet.

In a recent report by the Reserve Bank of Australia (RBA), January 2023, credit card purchases reached a record high of $33.5 billion. Australian news journalist Eli Green noted, “that’s a whopping increase of 17 per cent in the past year, representing an extra $4.9 billion on Australian credit card bills.”

Amy Bradney-George, a credit card expert on Finder, added that many consumers are beginning to depend on their credit cards to pay for essentials like food and utilities. Moreover, this increase has increased by 50 per cent in just the past two years.

George added that one in four Australians, or around 27 per cent of the population, experience difficulty managing finances without credit cards, compared to 18 per cent in 2021. She added that the average credit card spending had reached $3,056 as inflation soared. George also noted that, unfortunately, the increase in wages has not been increasing as fast as we would want to.

Mark Humphery-Jenner, an associate professor at the University of New South Wales school of banking and finance, believes that the significant increase in credit card spending can be attributed to several factors.

In an interview, Jenner noted, “Consumers might be confident about the economy and are willing to spend. Or, inflation might have forced them to spend more in nominal terms. Or, they are exhausting their savings and are relying more on credit card debt.”

The associate professor further pointed out that the third factor may be what most Australians are in and may be why many rely on their credit cards. Jenner noted that the average household savings significantly dropped in 2022 as many Australians are increasing their savings as the prices of commodities steadily rise.

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