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No.86 - 02.12.08

Debt landscape reveals

opportunity Despite ongoing negative economic news, GenerationY consumers show no intention of economising and there are signs that older consumers aren’t necessarily buying the negative media hype, even if their spending has been somewhat curtailed this Christmas. As reported last week in Your Industry, a survey recently showed that consumer sentiment rose 4.31 per cent in November, compared to October figures, and it’s possible that the strongest link to this changed sentiment relates directly to petrol prices, which have fallen towards $1 per litre. Three months ago, many will recall the concern that petrol would reach $2 a litre by Christmas. There are certainly many reasons for Generation Y (18-29 year olds) to be demonstrably optimistic. For starters, many still live at home, do not have a mortgage, and most have not experienced recession in their working life. Governments, both Federal and State, are offering record levels of assistance to first home buyers and interest rates have fallen dramatically, with further reductions forecast. Much of the pain of rising official interest rates has already impacted upon owners in compromised positions. Of those that found themselves over-extended, many have already sold to reduce their debt burden or been subject to repossession orders. That now leaves those that may be affected by any rise in unemployment in the next twelve months, and that remains a concern.

The current debt landscape in Australia reveals some of the reasons for the variance in consumer attitudes to the global economic downturn. The largest share of financial assets in Australia is currently held by 41.8 per cent of the population2 - those aged 45 – 59 years. The next largest group holds 32.5 per cent of assets – those aged 60 plus years of age. So, nearly three quarters of financial assets are in the hands of those that are reasonably well established, who have managed their way through a period of rising interest rates, and who are now benefiting from significantly lower rates as well as lower living costs. This group, perhaps ironically, is the group that has most curtailed retail spending. Interestingly though, since 1998 the share of wealth for 30 to 44 year olds has decreased from 28.8 per cent to just a little over 20 per cent today.The proportion of 18 to 29 year olds with home loans has fallen from 7.9 per cent to just 5.1 per cent over the same period.This group seems least concerned by the current economic climate. Knowing that first home buyer enquiry has leapt by 30 per cent, and that the majority of first home buyers are aged 18 to 44, this market segment is awash with confidence and is likely to offer increased opportunity through until at least 30 June 2009 – when the Federal Government’s boost to the first home buyers grant scheme ends. 1 2

Westpac and Melbourne Institute Roy Morgan Research


Interestingly though, since 1998 the share of wealth for 30 to 44 year olds has decreased from 28.8 per cent to just a little over 20 per ce...