Australian Consumer Credit: Forecasts and Future Opportunities
GlobalData’s “Australian Consumer Credit: Forecasts and Future Opportunities” report analyzes the Australian consumer credit market, with coverage of both supply and demand factors as well as sectoral analysis.
Consumer reservations about debt levels and repayment will relax as the economy continues to grow and unemployment falls. However, consumers will be cautious about taking on new debt, with consumer credit gross advances growing by a modest CAGR of 2.7% between 2017–20. Outstanding balances and gross advances have yet to reach pre-crisis levels. We now expect total fixed and revolving credit loans to reach A$156.6bn by 2020, with a CAGR of 2% over the forecast period. Australia’s mining states experienced a rough patch late in 2014, as the mining sector suffered due to the commodities bust. The end of the mining investment boom locally also led to a significant disparity in growth between Australian states. Although in its infancy, the new US administration has had a positive impact on major commodity prices, along with continued demand from East Asia. If sustained this will benefit Australia’s mining states and allow for continued expansion of the personal loan market.
Specifically, the report -
- analyzes the relative performance of the major sectors of the Australian consumer credit market
- reviews the drivers behind recent market performance
- identifies changes in the market dynamics and performance of Australia’s biggest banks
- analyzes the loan product preferences of Australian consumers
- forecasts balances outstanding
- forecasts future drivers of growth and product features
- Specialist loan providers (non-authorized deposit institutions) are rapidly increasing their market share at the expense of established authorized deposit-taking institutions (ADIs), rising from 11.3% in January 2010 to 23.2% in October 2016.
- Economic contraction in Australia’s primary mining and manufacturing states and relatively resilient economic activity across the Eastern Seaboard have caused New South Wales’ share of gross advances to rise by 6%, raising the risk of geographic concentration of debt.
- Strong growth figures from the P2P sector mask the fundamental problem of low consumer awareness, despite high levels of online research. The small digital marketing budgets of P2P lenders relative to established banks and specialist finance lenders will likely hamper their growth prospects.
Reasons to buy
- Which factors will impact the supply of lending?
- Which factors will affect consumer demand for credit?
- Which sectors offer the best prospects and opportunities for expansion over the next few years?
Table of Contents
1. EXECUTIVE SUMMARY 2
1.1. The Australian personal loan market is entering a period of slower growth 2
1.2. Key findings 2
1.3. Critical success factors 2
2. OVERVIEW TO 2016 7
2.1. Personal lending balances decreased in 2016 7
2.1.1. 2016 gross advances started to grow again after two years of decline 7
2.1.2. Balances outstanding marginally contracted in 2016 by 1.3% year-on-year 7
2.1.3. Economic growth has continued, but capacity and willingness to take on more debt will be constrained 7
2.1.4. Product preferences have seen little change in recent years 8
2.1.5. Fixed-rate loans remain most attractive to Australian consumers 8
2.1.6. Australian consumers are more price-sensitive on car loans 9
2.2. Macroeconomic disparities across AustraliaÂ’s states have led to debt concentration increasing 11
2.2.1. The rebound in the share of lending on the Eastern Seaboard has not come from dramatically higher volume 11
3. OUTLOOK FOR 2017 AND BEYOND 12
3.1. Total fixed and revolving credit loans will reach A$156.6bn by 2020 12
3.1.1. Market growth will resume but will only see modest gains 12
3.1.2. 2017 will be the start of a slow turnaround for gross advances 12
3.2. Demand for credit will slowly increase 13
3.2.1. Macroeconomic conditions will help to maintain consumer demand at current levels 13
3.2.2. Lenders need to be aware of the geographic concentration of their assets, as household debt-to-income reaches a new high 14
3.2.3. Consumer confidence is recovering, albeit with some hesitancy, suggesting consumers may be unsure of their ability to take on new debt 15
3.2.4. Retail sales are showing signs of growth, supporting uneven lending growth 16
3.3. Traditional lenders risk further loss in market share as new competitors take advantage of shifts in consumer behavior 17
3.3.1. Australian consumers are becoming more comfortable using non-ADIs for financing 18
3.3.2. Providers need to maximize their cross-selling opportunities 18
3.3.3. Consumers have become more comfortable with non-traditional lenders 18
3.3.4. Internet research has become a standard research channel, with consumers comparing reputation and rates 21
3.4. Lending across the subsectors of consumer credit will vary significantly 21
3.4.1. The new and used car finance market will be the strongest-performing sector 21
3.4.2. Gross advances for new and used cards will almost match credit cards and unsecured line of credit lending by 2020 23
3.4.3. Increased credit card lending will require winning clients off rivals 24
3.4.4. Demand for debt consolidation and refinancing products will rebound but then gradually decrease over the forecast period 25
3.4.5. Demand for new and used car finance will outperform all other sectors 26
3.4.6. The travel and healthcare lending categories will grow moderately in response to an improving economic outlook 27
3.4.7. Credit for land and housing construction will enjoy strong growth 28
3.4.8. Financing for household goods will experience strong growth over the forecast period 30
4. INNOVATION WILL NURTURE NEW SOURCES OF CREDIT 31
5. APPENDIX 32
5.1. Abbreviations and acronyms 32
5.2. Definitions 33
5.2.1. Gross advances 33
5.2.2. Balances outstanding 33
5.2.3. Line of credit 33
5.3. Methodology 33
5.4. Bibliography 33
5.5. Further reading 34
List of Figures
Figure 1: Australian consumers’ historic restraint has caused balances outstanding to fall despite a recovery in new lending 8
Figure 2: Few Australians opt for the uncertainty of variable rate products 9
Figure 3: Partnering with car dealers will require fast approval and competitive rates 10
Figure 4: Total fixed and revolving credit lending will reach A$156.6bn by 2020 13
Figure 5: Future rate cuts unlikely, raising potential problems for debt servicing in Australia 15
Figure 6: Consumer confidence has been volatile, indicating a degree of hesitancy 16
Figure 7: All retail sectors experienced moderate-to-strong growth in 2015 17
Figure 8: Non-ADIs are starting to grow their market share quickly 19
Figure 9: Specialist finance companies in the ‘Other’ category are the fastest-growing among non-ADIs 20
Figure 10: Balances outstanding across seven consumer credit categories 22
Figure 11: Debt consolidation and refinancing will grow once again over the forecast period 23
Figure 12: Credit card balances outstanding are forecasted to reach A$58.1bn by 2020 25
Figure 13: Demand for debt consolidation refinancing will recover over the forecast period 26
Figure 14: Gross advances for new and used cars will match credit card lending by 2020 27
Figure 15: Balances outstanding for ‘Travel and Other’ lending are forecast to reach A$10.7bn by 2020 28
Figure 16: Land and housing construction balances outstanding will reach A$12.7.6bn by 2020 29
Figure 17: Spending on household goods will rise in line with the improved economic outlook 30
Secondary Research Information is collected from a number of publicly available as well as paid databases. Public sources involve publications by different associations and governments, annual reports and statements of companies, white papers and research publications by recognized industry experts and renowned academia etc. Paid data sources include third party authentic industry databases.
Once data collection is done through secondary research, primary interviews are conducted with different stakeholders across the value chain like manufacturers, distributors, ingredient/input suppliers, end customers and other key opinion leaders of the industry. Primary research is used both to validate the data points obtained from secondary research and to fill in the data gaps after secondary research.
The market engineering phase involves analyzing the data collected, market breakdown and forecasting. Macroeconomic indicators and bottom-up and top-down approaches are used to arrive at a complete set of data points that give way to valuable qualitative and quantitative insights. Each data point is verified by the process of data triangulation to validate the numbers and arrive at close estimates.
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REPORT WRITING/ PRESENTATION
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