Australian Consumer Credit: Forecasts and Future Opportunities 2018
Australias overheating property market gradually lost steam in 2018 due to investors feeling jittery along with foreign capital outflows. Although falling property prices are good news for Australian buyers who have been priced out over the past few years, the current economic environment is pushing the market on the defensive. Business confidence is falling, influenced by uncertain ties in the greater global economic atmosphere. While this has not yet affected consumer confidence, the pressure will certainly be felt in the near term. With this in mind the next few years will be challenging for the Australian lending market.
This report analyzes the Australian consumer credit market, with coverage of both supply and demand factors as well as sectoral analysis.
Specifically the report explores -
- Specialist loan providers are rapidly increasing their market share at the expense of established authorized deposit-taking institutions, recording a compound annual growth rate of 7.9% between June 2010 and June 2017.
- Business confidence has sharply decreased since Q2 2018. While consumer sentiment is still on the up, declining business confidence will affect consumers over the near term, which in turn will tighten up consumer consumption.
- 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.
- How the personal lending market faired in the previous year and what the future will hold.
- Factors that will affect the personal lending market.
- Net changes in market share across product areas.
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
1.1. Market summary
1.2. Key findings
1.3. Critical success factors
2.1. Personal lending balances decreased in 2018
2.1.1. 2018 gross advances showed signs of weakness
2.1.2. Balances outstanding marginally contracted in 2018
2.1.3. Economic growth has continued, but capacity and willingness to take on more debt will be constrained
2.1.4. Fixed-rate loans remain most attractive to Australian consumers
2.1.5. Australian consumers are more price-sensitive on car loans
2.2. Macroeconomic disparities across Australias states have led to debt concentration increasing
2.2.1. The rebound in the share of lending on the Eastern Seaboard has not come from dramatically higher volume
3. OUTLOOK FOR 2018 AND BEYOND
3.1. Total fixed and revolving credit loans will reach A$164.7bn by 2022
3.1.1. Market growth will resume, but only with modest gains
3.1.2. 2018 was the start of a slow turnaround for gross advances
3.2. Demand for credit will slow
3.2.1. Macroeconomic conditions will help maintain consumer demand at current levels
3.2.2. Lenders need to be aware of the geographic concentration of their assets as household debt-to-income reaches a new high
3.2.3. Consumer confidence is recovering, albeit with some hesitancy, suggesting consumers may be unsure of their ability to take on new debt
3.2.4. Retail sales are showing signs of weakening, pointing to softer lending growth
3.3. Traditional lenders risk further loss in market share as new competitors take advantage of shifts in consumer behavior
3.3.1. Australian consumers are becoming more comfortable using non-ADIs for financing
3.3.2. Providers need to maximize their cross-selling opportunities
3.3.3. Consumers have become more comfortable with non-traditional lenders
3.3.4. The internet has become a standard research channel, with consumers comparing reputation and rates
3.4. Lending across consumer credit subsectors will vary significantly
3.4.1. The new and used car finance market will be the strongest-performing sector
3.4.2. Gross advances will grow moderately over the forecast period as consumers exercise caution
3.4.3. Increased credit card lending will require winning clients off rivals
3.4.4. Demand for debt consolidation and refinancing products will remain flat over the forecast period
3.4.5. Demand for new and used car finance will be stronger than most other sectors
3.4.6. The travel and other lending category will remain flat as consumers stop splurging
3.4.7. Credit for land and housing construction will enjoy strong growth
3.4.8. Financing for household goods will experience strong growth over the forecast period
3.5. Innovation will nurture new sources of credit
4.1. Abbreviations and acronyms
4.2. Supplementary data
4.3.1. Balances outstanding
4.3.2. Gross advances
4.3.3. Line of credit
List of Tables
Table 1: Gross advances per state (A$m), 2010-19f
Table 2: Gross advances (A$000s), January 2010-August 2018
Table 3: Australian personal lending balances outstanding (A$bn), 2015-22f
Table 4: Australian personal lending gross advances (A$m), 2015-22f
Table 5: Gross advances and balances outstanding (A$bn), 2007-18
List of Figures
Figure 1: Australian consumers historic restraint has caused balances outstanding to fall
Figure 2: Fixed-rate products are significantly more popular than variable rates
Figure 3: Secured loans are preferred when borrowing to purchase a vehicle
Figure 4: Total fixed and revolving credit lending will reach A$164.7bn by 2022
Figure 5: Future rate cuts are unlikely, raising potential problems for debt servicing in Australia
Figure 6: Consumer confidence has been volatile, indicating a degree of hesitancy
Figure 7: All retail sectors have declined since the moderate to strong growth seen in 2015
Figure 8: Non-ADIs are starting to grow their market share quickly
Figure 9: Specialist finance companies in the other category are the fastest-growing among non-ADIs
Figure 10: The new and used car finance market will increase its share from 14% in 2014 to 20% in 2020
Figure 11: Debt consolidation and refinancing will grow once again over the forecast period
Figure 12: Credit card balances outstanding are forecasted to reach A$56.2bn by 2020
Figure 13: Demand for debt consolidation refinancing will recover over the forecast period
Figure 14: Gross advances for new and used cars will record strong growth over the forecast period
Figure 15: Balances outstanding for travel and other lending are forecast to reach A$13.1bn by 2020
Figure 16: Land and housing construction balances outstanding will reach A$17.4bn by 2020
Figure 17: Spending on household goods will remain static
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