Usage of credit card limits at 14-year low

Credit & Debit cards; Weekly petrol price

• Petrol: Last week the key Singapore gasoline price recorded the biggest percentage increase in a year, up by US$6.60 or 13.6 per cent to US$55.20 a barrel. In Australian dollar terms the Singapore gasoline price rose by $7.73 a barrel or 11.7 per cent to $73.72 a barrel.
• MotorMouth records the following retail prices for capital cities today: Sydney 94.9c; Melbourne 114.40c; Brisbane 120.6c; Adelaide 97.7c; Perth 103.7c; Canberra 112.7c; Darwin 116.2c; Hobart 118.0c.
• Credit cards: The average credit card balance fell by $77.10 (2.4 per cent) to $3,114.30 in January. In smoothed terms (12 month average) the average balance was down by 1.5 per cent – the biggest fall in 21 months.
• Credit limits: Usage of credit card limits eased from 35.2 per cent to 34.3 per cent in January – a 14-year low.
• ATM use: Withdrawals at automated teller machines in January were down by 7.2 per cent on a year ago in smoothed terms, the biggest decline on record.

What does it all mean?

• Global oil prices have surged in the past week. In fact the almost 14 per cent lift in the Singapore unleaded price was the strongest gain in over a year. Even the heavy lifting Australian dollar has not managed to buffer the price gains. In Australian dollar terms prices the Singapore unleaded price lifted by almost 12 per cent. Importantly while petrol prices will lift from recent seven year lows they remains relatively depressed, providing households and businesses with additional spending power.
• In addition the discounting cycle continues to pay dividends for motorists – provided you are filling up at the cheap end of the cycle. More capital cities are experiencing petrol below $1 a litre. But the key is to keep an eye on the discounting cycle. In Sydney and Adelaide, prices are holding between 94-98c; Perth 104c; while in Melbourne and Brisbane prices are around $1.15-$1.20 a litre. Clearly filling up at the cheaper days of the cycle can yield motorists substantial savings.
• Consumers continue to be savvy about plastic card use. The average credit balance has gone backwards over the past year with the smoothed measure at a near two-year low. And given that the inflation rate is above 2 per cent, it would suggest that credit card debt is falling even further in real terms. Cardholders are frequently paying off credit card debt by the due date and using cards to maximise loyalty points. In addition usage of credit card limits is holding at a 14-year low.
• Interestingly, average ATM withdrawals fell by 7.2 per cent in the year to January – the biggest fall on record. And the average value of a debit card transaction was just $53.40 in smoothed terms – a record 12-year low. No doubt the changes technology with PayPass and Paywave are resulting in fewer Aussies carrying physical cash and also using their cards for smaller purchases.
• The Reserve Bank will continue to remain on the interest rate sidelines – comfortable about the way the Australian economy is evolving. Importantly, activity levels are lifting, driven by stronger home construction. Policymakers are likely to focus on the labour market and Australian dollar in coming months

What do the figures show

Petrol prices

• Today the national average wholesale (terminal gate) unleaded petrol price stands at 101.9 cents per litre, up 3.1 cents per litre on a week ago. The terminal gate diesel price stands at 96.5 cents a litre, up 2.2 cents over the week. (Data on pump or retail prices is released on Tuesday).
• Last week the key Singapore gasoline price rose by US$6.60 or 13.6 per cent to US$55.20 a barrel. In Australian dollar terms the Singapore gasoline price rose by $7.73 a barrel or 11.7 per cent to $73.72 a barrel or 46.36 cents a litre.
• MotorMouth records the following retail prices for capital cities today: Sydney 94.9c; Melbourne 114.40c; Brisbane 120.6c; Adelaide 97.7c; Perth 103.7c; Canberra 112.7c; Darwin 116.2c; Hobart 118.0c.

Credit card lending:

• The average credit card balance fell by $77.10 (2.4 per cent) to $3,114.30 in January. Compared with a year ago, the average credit card balance was down 1.7 per cent. In smoothed terms (12 month average) the average balance was down by 1.5 per cent – the biggest fall in 21 months.
• Of credit cards attracting interest charges, the average outstanding balance rose by $11.10 in January to $1,981.50. The average balance accruing interest is down by 4.6 per cent on a year ago. In smoothed terms (12 month average) the average balance was down by 5.7 per cent on a year ago – the biggest decline in 16 months.
• The average credit card limit rose by $11.80 to $9,075.90 in January. The average credit card limit in January was down 0.1 per cent on a year ago. Usage of credit card limits eased from 35.2 per cent to 34.3 per cent in January – a 14-year low.
• On average, there were 11.3 transactions made per each credit card account in January, up from 11.1 a year ago. The average value of purchases was $119.4 in January. The rolling annual average of purchases eased from $129.4 to $128.9 in January – an 11-year low.
• The number of cash advances recorded a 2.4 per cent annual fall in smoothed (12-month average) terms in December.

Debit card lending & ATMs

• The number of debit card accounts rose by 3.2 per cent in the year to January to 41.66 million.
• The number of purchases and cash-out transactions made with debit cards in January was up by 13.7 per cent on a year ago. The annual growth rate has averaged 12.1 per cent over the past two years.
• On average there were 8.8 transactions made per debit card in January, up from 8.1 a year ago. The average value of a transaction was $52.02 with the rolling annual average at $53.40 – a record (12-year) low.
• Transactions at automated teller machines in January were down by 8.4 per cent on a year ago. In smoothed terms, ATM transactions were 7.2 per cent down on a year ago, the biggest decline on record.

What is the importance of the economic data?

• The Reserve Bank releases data on credit and debit card transactions each month. The credit card figures are useful in highlighting consumer borrowing and spending trends.
• Weekly figures on petrol prices are compiled by ORIMA Research on behalf of the Australian Institute of Petroleum (AIP). National average retail prices are calculated as the weighted average of each State/Territory’s metropolitan and non-metropolitan retail petrol prices, with the weights based on the number of registered petrol vehicles in each of these regions. AIP data for retail petrol prices is based on available market data supplied by MotorMouth.

What are the implications for interest rates and investors?

• The Reserve Bank will be comforted by the more stable conditions in financial markets and the broader economy. The Federal Reserve meeting will garner the most interest this week, particularly in terms of the impact on the Australian dollar. CommSec expects no change to interest rate settings for the foreseeable future.