Credit Bill Mounts As Shoppers Splash Out

Sydney Morning Herald

Friday December 28, 2007

Jacob Saulwick

AUSTRALIAN shoppers are buying with gusto this holiday season, in contrast with counterparts in the US and Britain and triggering concerns about the nation's ballooning credit card debt.

Retailers are beaming after a December sales rush that is likely to add $20 billion to the total credit card debt.

In contrast, overseas reports suggest a restrained Christmas shopping period amid a mounting sense of economic crisis.

In the US, mortgage foreclosures have turfed hundreds of thousands from their homes and are tipped to put the economy into recession. British consumers remain spooked by a weakening property market and concerns about the banking system.

"We've already done the hard times in terms of the weakness in our housing cycle," a CommSec economist, Martin Arnold, said.

"The mindset of consumers is completely different to what it is overseas. When you've got a run on a bank, like you had with Northern Rock in the UK, it changes how consumers think."

Local retailers say sales have been steady, whereas overseas sales were concentrated in a late, pre-Christmas rush.

The chief executive officer of JB Hi-Fi, Richard Uechtritz, said the strength in December sales was in line with previous years, but the sales mix was different.

"Obviously the Nintendo Wii was a bigger seller this year than last. And navigational systems were a lot bigger this year."

The general manager of Bing Lee, Phil Moujaes, said sales had been strong "from the day of the election", and the post-Christmas period had remained busy.

But Carolyn Bond of the Consumer Action Law Centre advised shoppers not to be dazzled by large discounts on sale items without weighing up the cost of missed credit card payments.

The latest Reserve Bank figures available show consumers charged $18.7 billion to credit cards in October.

If past trends continue, the monthly tally should hit $20 billion in December. Most of this will be repaid in the same month, but Ms Bond warned against letting December's extra-large credit bill accrue interest.

"You can see the saving at the shop but it is the interest on your credit card that you don't think about, which you might only have to pay off a year into the future," she said. "Also, more and more people are drawing down on their mortgage to pay off their credit card debt, where the interest rates are higher. So Christmas shopping can actually increase the size of a mortgage."

The switch to online shopping is also adding to the reliance on plastic. Amazon.com reported its best Christmas, while eBay predicted a 10 per cent spike in transactions for December.

The surge is likely to continue as eBay users recycle unwanted gifts over the internet.

© 2007 Sydney Morning Herald

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