Savvy consumers; Healthy inbound tourism

Credit & debit card data; Tourism

• The average credit card balance recorded fell by $25 to $3,124 in March. In smoothed terms (12 month average) the average balance was down by 1.1 per cent.
• On average, there were 13.4 transactions made per each credit card account in March, up from 12.4 transactions of a year ago. The rolling annual average of purchases falling from $121.46 in February to $120.36 in March – a 14-year low.
• Cash shunned: Cash-out only transactions with debit cards were down by 8.4 per cent on a year ago.
• Tourist arrivals/departures: Tourist arrivals fell by 0.7 per cent in March. And departures fell by 3.2 per cent. Arrivals are up 5.7 per cent on the year with departures down 4 per cent.
• Tourists from China and Hong Kong rose to a record 1,488,400 over the past year, up 12.1 per cent over the year.

What does it all mean?

• The average Aussie credit cardholder has just over $3,100 in outstanding purchases on his/her card. This is an average – some have nothing outstanding, others a lot more. And each person has a different credit card cycle. But what is clear is that credit card debt remains well contained.
• In fact the average balance was closer to $3,070 late last year. The last time the average balance was so low was in late 2007 – almost nine years ago. Not surprisingly, more of us are choosing to pay off our purchases by the due date, a practice common across major economies – influenced by the low inflation/low interest rate regime and the former global financial crisis.
• What is interesting, is that consumers are still actively using credit and debit cards, paying off outstanding debt promptly, but the value per transaction continues to fall. There were an average of 13.4 transactions on each credit card account in March, up from 12.4 a year ago. But the average value of a transaction has fallen to a 14-year low.
• Similarly the average value of a debit card transaction was just $50.72 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.
• Chinese tourists are still flocking down under. Tourists from Greater China (China and Hong Kong) comfortably exceed those from New Zealand, but tourists from mainland China should pass NZ in their own right in the next few months. Interestingly the growth rates in Chinese tourist numbers have eased somewhat over the past year. In fact over the course of 2016 Chinese tourist recorded 22 per cent annual growth. Whilst so far over 2017 annual growth is average around 13 per cent.

What do the figures show?

Credit & debit card lending:

• The average credit card balance recorded a seasonal fell by $25 to $3,124.0 in March. Compared with a year ago, the average credit card balance was down 0.4 per cent. In smoothed terms (12 month average) the average balance was down by 1.1 per cent.
• Of credit cards attracting interest charges, the average outstanding balance rose by $4.60 in February to an 8-month high of $1,973.40. The average balance accruing interest was down by 1.9 per cent on a year ago. In smoothed terms (12 month average) the average balance was down by 2.1 per cent on a year ago.
• The average credit card limit recorded a fall of $1.30 to $9,054.60 in March to be down 0.4 per cent over the year. Usage of credit card limits rose from recent 14-year lows (34 per cent) to 34.5 per cent in March.
• On average, there were 13.4 transactions made per each credit card account in March, up from 12.4 transactions a year ago. The average value of purchases was $108.73 with the rolling annual average of purchases falling from $121.46 in February to $120.36 in March – a 13-year low.
• Credit card accounts stood at 16.7 million, up 1.3 per cent over the year – the slowest growth in two years.
• There were 10 debit card purchases per account in March, up from 9.3 transactions a year ago. Average purchase size was $49.13 with the annual average down from $50.95 to a record low of $50.72.
• The number of debit cards stood at 45.15 million in March, up 7.3 per cent on a year ago.
• Cash-out only transactions by debit cards were 8.4 per cent lower than a year ago.

Overseas arrivals & departures

• Tourist arrivals fell by 0.7 per cent in March. And departures fell by 3.2 per cent. Arrivals are up 5.7 per cent on the year with departures down 4 per cent.
• In March, tourists from Greater China (China and Hong Kong) totalled 125,400 (mainland China 106,500, Hong Kong, 18,900), ahead of New Zealand (114,500). Greater China passed NZ for the first time in September 2015.
• Over the past year a record 1,238,800 tourists came to Australia from China, up 12.9 per cent over the year. Tourists from China and Hong Kong rose to a record 1,488,400 over the past year, up 12.1 per cent over the year. Tourists from New Zealand totalled 1,358,400 visitors over the past year, but were up just 3.6 per cent.
• Net permanent and long-term arrivals to Australia totalled 281,520 in the year to March, rising further away from recent decade lows. Permanent & long-term arrivals stood at 32-month high of 731,320 people.

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.
• The Australian Bureau of Statistics releases data on overseas arrivals and departures is produced monthly and is an indicator of the health of the tourism sector. The figures are also useful in understanding spending trends and tracking migrant numbers – an indicator with widespread implications for employment, housing and spending.

What are the implications for interest rates and investors?

• The gloom and doom school suggest that consumers are taking on too much debt. But it certainly isn’t credit card debt. In smoothed annual terms, credit card has been shrinking for the past four years – even more of a slide if inflation is added in. Aussies may be taking out bigger home loans but they are cutting back on other debt. Household wealth is at record highs and the household budget has been improving due to improving affordability of a raft of item
• The challenge for financial institutions is how to efficiently configure bricks-and-mortar branches. Retail customers can do most transactions digitally or remotely. And customers even aren’t coming in to branches to get cash, instead making transactions with cards more often.
• CommSec expects no change to interest rates in the foreseeable future.