Paying off credit card better than $10,000 payrise
I often get asked what will be the lasting effects of the Global Financial Crisis and the Australian recession on Australian attitudes and behaviours. What will be the lesson to be learnt from all this?
In many ways, it is early days for Australian consumers. Sure the finance media has been full of bad news for over twelve months.
But up until the end of January we were still finding that consumers were taking a cautiously optimistic approach to the economy.
We’ll have to wait and see how long our economic troubles last before we can predict any lasting changes to the outlook of any generation of Australian.
However the one definite change already happening is in the area of attitudes to debt, particularly credit card debt.
We ran a poll of more than 1000 Australians last week and asked them: “If there was one thing you could change about your current financial situation, what would it be?”
We gave them the following options:
• To be free of all credit card debt
• To reduce the interest rate on my mortgage by 0.5%
• To get a job raise of $10,000
• To have a better performing superannuation
• To be eligible for six months of parental leave
• None of the above
It was no surprise that almost a third (31%) opted to be free of all credit card debt, outstripping by one per cent those who opted for a $10k pay rise.
These numbers square with what we have been finding in our research since December.
More than anything else, Australians are now aware of the traps of credit card debt, particularly at a time when they are anxious about job security and wage restraint.
These poll results give us some insight into the reasons why the Rudd government had taken a popularity hit in recent weeks.
From the point of view of our research, it’s not so much a reflection of people’s dissatisfaction with the budget, rather the almost universal disapproval for the $900 stimulus package approach to jump-starting the economy.
In our qualitative research we have found that while consumers reported having various plans for their bundle of Rudd dollars, they were unanimous in the view that it was bad policy.
The reasoning? More retail spending on ‘stuff’ isn’t going save us from an economic meltdown created by us spending too much on ‘stuff’.
The government’s stimulus package has been seen by many consumers as the equivalent of melting the credit card on designer shoes.
They haven’t fully grasped onto the concept that spending equals jobs.
Perhaps, they are too focused on cutting back and sitting tight until they see how bad the recession will get.
This is clearly an opportunity for Malcolm Turnbull. Interestingly, while we have found that consumers express views about the stimulus package and deficit akin to Turnbull’s public pronouncements, they haven’t joined the dots. He has been listening to them but they haven’t been listening to him.
But given the recent focus on the deficit, consumers might start tuning in to his message of irresponsible government spending and a debt burden for future generations.
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