Cost of living crisis sparks explosion in personal debt levels of Australians to $70 billion 

Australians now collectively owe more than $70 billion as the cost-of-living crisis sparks an explosion in personal debt, extensive new polling shows.

Millions of people have turned to loans and credit cards to make ends meet over the past 12 months, as inflation pushed up household bills and the price of groceries and other consumer goods.

With inflation at 7 percent, research from the financial comparison website Finder has found that the average Australian now has $20,238 in debt, split between consumer loans and credit cards.

That’s an 11 percent increase from a year earlier, when the average person had $18,301 in credit card and consumer loans, according to the study.

Finder data showed that some 10.9 million Australians – about 54 percent of the adult population – used a credit card last month.

And about 2.8 million Australians, or one in seven people, have a personal loan. The same part of the population has a car loan.

On average, each Australian now has $1,948 in credit card debt, $6,920 in personal loans and a car loan with a balance of $11,370, according to the Finder’s consumer confidence tracker.

The survey, conducted by opinion pollster Qualtrics, aims to continuously map consumer confidence in Australia.

Finder says the research covers a nationally representative, growing sample of more than 51,000 people, with 1,000 people added to the poll each month.

People surveyed are asked how they are doing in a variety of areas, including wealth, happiness, financial sentiment and environmental awareness.

The study found that credit card debt has increased to a total of $18.6 billion, while personal loans and car loans are now estimated to be worth $19.6 billion and $32.3 billion, respectively.

Personal debt has risen to a total of $70.5 billion.

While government and Reserve Bank officials believe inflation has moderated after peaking late last year, consumer prices remain elevated and are not expected to return to more normal levels until late 2024.

A separate Finder survey found that 6.1 million or 30 per cent of Australians are extremely stressed about their current financial situation, up 22 per cent from a year ago.

Finder’s personal finance expert, Amy Bradney-George, said the rapidly rising cost of living had forced many people to borrow money just to pay for essentials.

“Many people have to turn to credit cards and personal loans to cover their daily expenses such as food and electricity,” she said.

“Debt makes it even more stressful for people to put food on the table.”

Ms Bradney-George urged Australians to protect their ‘financial health’ and pointed to the so-called debt snowball method as a way to regain control.

“If you start paying off your smallest debt first, you’ll see quick wins that help build momentum,” she said.

She also recommended that people check with their lenders to see if they can set up payment plans that fit their income.

“If your circumstances have changed, you can also talk to your bank’s support team about different options, such as payment breaks,” she said.

“You can also shop around for better rates or consider debt consolidation to help manage repayments.”

Australians have accumulated a mountain of personal debt as mortgage holders grapple with higher repayments due to rising interest rates.

In addition, health insurance premiums, HELP debt, and utility bills of some households and small businesses have all grown or are about to grow.

The cost of electricity is set to rise again soon for certain households and small businesses in some parts of the country, with Australia’s energy regulator confirming that prices will rise by 20 to 25 percent from July 1 in NSW, South Australia, South East Queensland.

Despite the federal government’s intervention in the energy market and wholesale power prices lower than last year at this time, customers with standard energy offerings are facing significant price increases in fiscal year 2023-2024.

About 9 percent of customers or 600,000 people have a standard market rate, which acts as a safety net or benchmark to ensure users don’t pay too much.

However, Anthony Albanese told parliament on Thursday that five million Australian families and one million small businesses would soon receive relief from their energy bills.

Under the policy announced late last year in response to rising electricity prices, caused in part by the war in Ukraine, the federal government will give money to the states and territories to take money off people’s energy bills this winter.

But not everyone benefits from the rebates, as they only reach income-supported households and small businesses that meet certain criteria.

Speaking in parliament on the last day of session before politicians flew home for their winter break, the prime minister also rattled off a list of some of Labour’s other living expenses.

Over 1 million Australians will pay less for childcare next month; 11 million Australians will pay less to see a doctor. Thanks to our budget, another six million Australians will pay less for their medicines.’