​Financial stress on the rise in lead-up to credit reporting changes

by Amy Rosenfeld03 Feb 2014
Consumer financial stress is forecast to rise during 2014 to its highest level in more than a year as the finance industry prepares for upcoming positive credit reporting changes.

According to the latest Dun & Bradstreet’s Consumer Financial Stress Index, financial stress is projected to reach a high of 23.4 points by June, after easing from a high of 24.9 points to 14.6 across 2013.

“Concerns around unemployment and the potential for inflation will test the manner in which consumers manage their finances,” said the report.

“Given that new credit reporting laws come into effect in March, including the reporting of late bill payments, consumers will need to stay-on-top of their repayment obligations.

“An increase in unmanageable consumer debts during the first quarter of this year, as a consequence of increased spending in the Christmas period, presents a risk to financial stress levels.”

Meanwhile, the latest quarterly inflation figures from the ABS have revealed that consumer prices increased by 0.8 per cent last quarter, above economists’ forecasts for a 0.4 per cent rise.

Looking ahead, D&B’s Business Expectations Survey reveals that 24 per cent of companies intend to raise their prices in the first quarter of this year, with the selling price expectations index rising to 19.5 points; its highest level since Q4 2010.

D&B’s Consumer Financial Stress Index declined in the majority of states and territories during December 2013 compared to the previous year, however it is forecast to increase again in Q1.

In the most populous state, New South Wales, the index eased to 19.2 in December 2013, the first time the measure has been below 20 points since April 2012. The state’s three-month forecast, however, shows the index rising again to 21.5 points.

In Victoria, financial stress fell to 17.6 points in December 2013, down from 27.3 a year earlier, however it is projected to rise moderately to 18 points by March.

The three-month state forecasts also reveal that Queensland and the Australian Capital Territory will overtake New South Wales and Victoria as the most financially stressed.
Queensland’s financial stress index is forecast to hit 27.9 points in March, from a level of 13.7 points a year earlier, while in the ACT the level is expected to more than double to 25.3 points, up from 10.2 points in March last year.

The increased forecasts for both states have been driven by a sharp rise in new finance and credit applications containing adverse listings.